Microsoft Took a Big Risk With Windows 8 and It's Starting to Backfire

Hewlett-Packard now sees Microsoft as a competitor. For years, Hewlett-Packard and Microsoft had a strong partnership -- but evidently, those days are over. The widespread backlash to Windows 8, combined with Microsoft's decision to release its own, competing hardware, has alienated Hewlett-Packard.

And while Microsoft looks to be on the verge of losing one of its longtime partners, Google is gaining one -- Hewlett-Packard has eagerly embraced both of Google's operating systems.

Microsoft's biggest gamble
Microsoft took a lot of risks with Windows 8. As the most radical redesign of the its operating system since 1995, there were a lot of things that could've gone wrong -- and many things did.

PC sales have been poor all year -- most recently, research firm Gartner said that PC shipments fell 8.6% in the third quarter, the sixth consecutive quarterly decline. In part, this may be structural -- consumers may simply prefer mobile devices running Apple's iOS and Google's Android -- but the widespread hatred of Windows 8 certainly doesn't help. This year, Microsoft's consumer satisfaction rating fell to its lowest level since 2007, while Samsung blamed Microsoft for falling PC sales.

But more important than the Windows redesign was Microsoft's decision to start making its own devices. Microsoft's Surface RT and Surface Pro are the company's flagship Windows 8 devices, and compete head-to-head with Windows 8 tablets offered by Microsoft's own hardware partners, including HP.

More Microsoft hardware is likely on the way
Microsoft isn't likely to stop at the Surface -- its recent reorganization focuses the company around "devices and services," and its purchase of Nokia's handset business shows that it's committed to making more devices in-house.

If HP stands by Windows, it could find itself competing against a flurry of Microsoft's own devices -- devices paid for, in part, by the licensing fees HP pays Microsoft to use its Windows operating system.

Microsoft's loss is Google's gain
To be clear, Hewlett-Packard still makes devices running Windows -- in fact, the vast majority of its PCs are powered by Microsoft's operating system. Moreover, given that Windows continues to dominate the enterprise market, this is unlikely to change, at least in the near future.

But while Hewlett-Packard continues to make Windows devices, it's making more and more devices powered by Google's operating systems -- both Android and Chrome OS. Most recently, it rolled out the Hewlett-Packard Chromebook 11, and last month, it announced a forthcoming successor to its 14-inch Chromebook model. HP has also introduced numerous tablets running Google's mobile operating, including the Slate 7, Slate 7 HD, Slate 7 Extreme, Slate 10 HD, and Slate 8 Pro.

And why not? Although HP has to compete against other Android manufacturers, most notably Samsung, it doesn't have to compete with the company that actually makes the operating system -- besides its Nexus devices (which are actually made by other companies) and its overpowered Chromebook Pixel, Google is not a major player in the hardware space.

Has Microsoft destroyed its ecosystem?
So far, HP is the only PC OEM to officially come out and label Microsoft a "competitor," but while HP may be the only company actually saying it, no doubt others are thinking it: Last year, shortly after Microsoft announced the Surface RT, Acer's CEO urged Microsoft to "think twice" about its decision.

Ultimately, Microsoft's biggest Windows 8 blunder may not have been the Metro interface, Windows RT, or the Windows app store; rather, its decision to create its own computers -- a strategy it has committed itself to -- may have irrevocably damaged its relationship with its OEM partners, including HP.

In the past, companies like HP had no choice -- there really wasn't anything out there, save Windows. But now, with Android and Chrome OS, Google has given Microsoft's partners a viable alternative -- alternatives these companies, notably HP, are embracing.

Research firm Gartner predicts that, by 2017, Google's Android will have effectively replaced Windows. With Microsoft's former partners switching sides, that prediction seems destined to come true.

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The article Microsoft Took a Big Risk With Windows 8 and It's Starting to Backfire originally appeared on

Sam Mattera has no position in any stocks mentioned. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple, Google, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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