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Windows 8: Redmond, We Have a Problem

Anton Wahlman

NEW YORK (TheStreet) -- I have lots of concerns about the version of Microsoft's (MSFT) Windows 8 that is expected to hit the market this fall.

Before I discuss them, let me make it clear that these concerns are largely irrelevant to Windows Phone 8, which was just introduced and should also hit the market this fall. Microsoft is doing most things right with Windows Phone.

I have been concerned about Microsoft for many years, first because of Apple's (AAPL) numerous initiatives (Apple stores, iTunes, and iOS), then because of Google (GOOG) Docs, which competes with MS Office, and then when I laid my hands on the first Google Chromebook. All of these were clear signs that Microsoft was going to lose market share and see price pressure in the future.

Then came the epic 8,600-word post on Feb. 9 by Steven Sinofsky, the head of Windows, on MSDN Blogs.

Titled "Building Windows for the ARM processor architecture," this was a declaration of Microsoft's intent to launch "full" Windows 8 on chips designed by ARM Holdings (ARMH) and built by NVIDIA (NVDA), Qualcomm (QCOM) and Texas Instruments (TXN).

This showed that Microsoft was going to be able to deliver something that Apple -- and Google -- could not: the full enterprise productivity suite on ARM, in the business productivity form factors.

On Feb. 9, Microsoft said it would deliver this new version of Windows 8 in tablet, laptop and desktop formats, and that this version would run Word, Excel and PowerPoint.

You would be able to buy a laptop that ran these apps, but did so with an ARM chip that had so little heat dissipation, and so little power consumption, that it would not require a fan -- just like the iPad -- and would therefore have a much better battery life, perhaps upwards of 20 hours.

Microsoft's "holy grail" formula was this: Imagine a customer who mainly needed to run Word, Excel and PowerPoint. It could now be done on hardware that Apple simply does not have.

With Apple, you either get the x86 (Intel (INTC))-based) MacBook, or you get the ARM-based iOS on an iPad.

The MacBook performs the Microsoft Office function perfectly, but the best battery life you can hope for is seven to nine hours, while the price of the hardware starts at $1,000 and goes up to well more than $2,000.

On the other hand, as much as there is a small number of people who torture themselves by using an iPad with a keyboard and use a variety of methods to obtain Microsoft Office access or compatibility, the vast majority of people find this to be an inferior approach for office productivity. The iPad is the market's best media consumption gadget, but it's not a work productivity tool.

After I reread Sinofsky's blog post a second time, I realized that the word "Outlook" was never mentioned. Word, Excel and PowerPoint were, but not Outlook. I asked Microsoft's investor relations about it. Was it simply a mistake? No, I was told, Windows 8 on ARM for tablets, laptops and desktops will not get Outlook.

Ouch.

The No. 1 reason most people I know stick with Microsoft is because Windows is the best platform to run Outlook. Yes, you can run Outlook on a Mac, but it's not the same -- unless you run Windows in a virtual machine (such as VMWare's (VMW) "Fusion" or equivalent). Apple's own address book, as well as Google's, simply doesn't have the functionality of Outlook.

For example, Apple's own address book is limited to 25,000 users, as is Google's, and you can't customize the views to sort columns on any criteria you want. There are millions of users out there who have converted everything they can to Apple and/or Google, but they still keep an old Microsoft PC around for the sole purpose of running Outlook.

So here was Microsoft with an exciting new platform that had a legitimate claim for an enterprise sweet spot that Apple and Google could not claim in the same way, and ... whoops, Microsoft just shot itself in the foot by excluding the one critical piece of the puzzle.

There is a special place on a wall of shame for those who are so stupid to have missed this critical point in the product planning. Ballmer, wake up!

Then came June 18, and Microsoft's surprise announcement of the two Surface tablets -- one based on ARM technology (built by NVDIA in this case) and the other based on x86. Let's distinguish between the two: The ARM version won't offer Outlook, whereas the x86 version will run Outlook. In other words, the ARM version is doomed for the enterprise market, whereas the x86 version passes at least this hurdle.

But there are two more issues with both versions of the Surface tablet that will further hobble the enterprise version: screen size and keyboard.

For enterprise productivity, most workers want a device that's got at least a 12.1-inch screen. The Surface tablets are 10.6 inches. Game over, good night, roll down the curtain.

The screen size also largely determines the size and nature of the keyboard. There are three problems for the Microsoft Surface's keyboard:

1. It most likely is too small, because of the 10.6-inch screen size.

2. At least one of the keyboards Microsoft showed was flimsy. This will work OK on a hard and flat surface, but how about trying to work with it in your lap? It's called a lap-top after all. Try writing something with a pencil on a single 8.5 x 11 inch sheet of paper in your lap, and you get the drift.

3. A keyboard attached to a tablet will also be top-heavy. Again, if it's not flimsy, it will still be a bit difficult to deal with in your lap. How would the screen stay up? Microsoft Surface has a stand to allegedly compensate for this, but although it works on a flat table, of course it is essentially impossible to use in your lap.

Bottom line on Microsoft Windows 8 in the form of its own Surface tablets: fail, fail and fail.

What about regular x86 Windows 8 for laptops and desktops? Well, the answer is divided into two parts of the market: Consumer and enterprise.

1. Consumer: These users are fleeing Microsoft by the droves into the arms of Apple, and may also begin to go for Google's Chromebooks -- at least if Google manages to significantly turn on the marketing machine. Will Microsoft be able to stem the tide with Microsoft 8? Possibly, but I doubt it.

I have yet to hear a single consumer who has said "I was going to ditch my Windows laptop for Apple or a Google Chromebook, but instead I've chosen to wait for Windows 8 so that I will be more likely to stay with Windows." We shall see, but color me skeptical.

2. Enterprise: This is the big kahuna for Microsoft. I keep hearing all day long that Microsoft is going to have such a fantastic year ahead of us because there is an "upgrade cycle" to Windows 8 starting in the fall. The Windows 8 "upgrade cycle" mantra is repeated endlessly, and nobody seems to challenge it.

Enterprises were thrilled to upgrade to Windows 7 in the last few years, for good reason. It offered much-improved functionality and security for enterprises of all sizes. It was therefore a massive upgrade cycle, the biggest for Microsoft ever.

However, when I ask business owners if they plan on upgrading to Windows 8, they laugh at me. In their minds, all Windows 8 brings to the party is a bunch of really distracting and annoying tiles that will subtract from the attention and productivity of their employees.

A typical comment I hear is, "We want our employees to focus on work, not to be dragged into Twitter and Facebook all day long."

I would go so far as to say that enterprises tell me that they would pay to stay on Windows 7, which works just fine, rather than put Windows 8 in front of their workers. That's bad.

Don't just take my word for it. I've been reading the comments on the Microsoft blog that deals with Windows 8.

Yes, not every single comment is negative, but spend a few hours reading them and you will see many strong arguments against deploying Windows 8 in the enterprise.

For all I know, Windows 8 may have some wonderful attributes if you are willing to look past those flashing social networking tiles.

Perhaps Microsoft will allow you to turn off all of that distracting garbage and focus on only the productive part of the OS that would look just like Windows 7 does today. If so, Microsoft will have averted a disaster. Surely Microsoft will be clarifying this in the near future, in case people like me missed it already.

But if Microsoft doesn't fix or otherwise clarify this and the several other problems with Windows 8, then I doubt that it will have the Windows 8-led renaissance year ahead that the market seems to be expecting.

If Microsoft continues to develop products in such a tone-deaf manner, the year ahead could look more like Palm 2010 or Research In Motion (RIMM) 2011. I hope not.

At the time of submitting this article, the author was long AAPL, GOOG, QCOM, FB and NVDA, and short MSFT, AMD and AMZN.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.