(By Mani) Software giant Microsoft Corp. (NASDAQ: MSFT) announced the surprise departure of Windows and Windows live head Steven Sinofsky, just a couple of weeks after the launch of Windows 8, whose adoption is probably below Microsoft's internal expectations.
Julie Larson-Green will be promoted to lead all Windows software and hardware engineering. Tami Reller retains her roles as chief financial officer and chief marketing officer and will be responsible for the business of Windows.
Sinofsky, who was the president of the Windows Division from July 2009, is leaving after 23 years of service at Microsoft. He was credited with reviving the Windows Division after the Vista debacle, and was responsible for the development and marketing of Internet Explorer, as well as online services such as Outlook.com and SkyDrive.
[Related -Seven Top Stocks With Fresh Dividend Growth Or Share Buybacks]
There were rumors that Sinofsky, who was even touted as the successor to Microsoft CEO Steve Ballmer, was not good at managing relationships with other top executives, customers, partners and developers. This has become a key factor in the departure of Sinofsky at a time when an executive's responsibilities don't end with delivering the software.
Ballmer said: "We've built an incredible foundation with new releases of Microsoft Office, Windows 8, Windows Phone 8, Microsoft Surface, Windows Server 2012 and ‘Halo 4,' and great integration of services such as Bing, Skype and Xbox across all our products. To continue this success it is imperative that we continue to drive alignment across all Microsoft teams, and have more integrated and rapid development cycles for our offerings."
[Related -The Chip Maker Short Sellers Should Be Watching]
However, the real culprit that might have prompted the management reshuffle was the lukewarm response for Windows 8. Since the launch in late October, Windows 8 adoption has been modest and only 0.45 percent of Windows computers in October used Windows 8, according to a data from Net Applications. That compares to a much higher adoption rate of 2.33 percent for Windows 7 three years ago.
"Windows 8 is an un-even product, with negatives out-weighting the positives," Global Equities Research analyst Trip Chowdhry wrote in a note to clients after speaking with developers.
Following are the positives of Windows 8:
a. Responsiveness to touch
b. Smoothness to pinch-to-zoom; zooming-in and zooming-out
c. High-resolution and clear type fonts
d. Integrated keyboard
However, Microsoft poorly executed certain things and they include:
a. Confusing switching between Traditional User Interface and Metro
b. Frustration in figuring out how to log out
c. Frustration in figuring out how to un-install an application
d. Extremely confusing and complicated gestures
e. Applications, including Microsoft Office, are not optimized for touch, but are insteadv optimized for mouse
In addition, launching Windows 8 on an ARM processor turned out to be a strategic blunder as customers are confused. Microsoft Office on Windows 8 RT is a dumbed down version of Microsoft Office that does not have all the features of the desktop version, and a developer has to recompile all the applications that were for X86 for an ARM based processor.
The above things prompted customers to wait for Intel's X86 version of Windows 8 for Surface, which is expected to come in January 2013.
"It is suicidal for Microsoft to have launched Windows 8 RT Surface first on ARM processor, was the converged view we got," Chowdhry said.
Investors should not ignore the fact that Microsoft built Windows 8 with the intent to capture tablet and smartphone market share rather than traditional PCs. Redmond, Washington-based Microsoft may be betting that customers would buy Windows 8 tablets and smartphones as they were already used to the Windows interface on PCs.
So, the real success of Windows 8 lies on the sales (we mean wide adoption) of smartphones and tablets rather than PCs. If, Microsoft can't get the desired momentum out of these two territories, then the investments and efforts won't pay off.