Microsoft Falls as Windows 8 Sales Stumble

NEW YORK ( TheStreet) - Microsoft ( MSFT) says they've moved 100 million copies of their Windows 8 operating system in it's first six months of life. Microsoft's spin on the current situation. That's one way to look at it.

The other way is to see when those 100 million licenses actually sold. Microsoft released Windows 8 in October, 2012. In its first three months of life (November through January) they say they moved 60 million copies of their new OS.

Microsoft shares were falling 1.1 percent Tuesday afternoon to $33.38.

But, that also means that after the initial release euphoria - and the holiday shopping season boost - they sold only another 40 million copies of Windows 8 in its second three months (February-April) of life. Any way you look at it those numbers mean sales are slowing down.

That shouldn't come as a shock to anyone - from hardware manufacturers to retailers to end users. People just aren't interested. In the past month, I've heard (from a representative of a major PC manufacturer) that an increasing number of customers are now asking if they can still get Windows 7 on the new computers. They don't want Windows 8. That's a sign of a huge problem.

Microsoft has to be aware of what's going on. They're already working on the first major Windows 8 upgrade. Tami Reller, Microsoft's Chief Marketing and Chief Financial Officer, interviewed on a corporate blog says they're busy polishing Windows 8.1, codenamed Windows "Blue", coming later this year.

Blue should provide a bunch of upgrades and fixes - and hopefully the return of the "Start" button which disappeared in version 8.0. But, according to Reller, 8.1 will offer these new features "across an increasingly broad array of form factors of all sizes, display, battery life and performance". And that confirms a recent statement by Asus Chairman Jonney Shih that we'll probably see a new breed of smaller-screened Windows tablets, priced under $300, later this year.

Microsoft must find a way to excite consumers about Windows 8. Improving the software is a good start. Getting the price of Windows tablets down so they can compete with Apple's ( AAPL) iPad mini is an even better move. Unfortunately, will probably be awhile before we'll see sub-$200 Windows computers to compete with the device like the Google ( GOOG)/Asus Nexus 7 Android tablet.

I can only imagine what might happen to Windows RT next. RT the somewhat crippled version of Windows 8 made to use ARM-powered devices. RT devices run a limited number of Microsoft programs and nothing else. It's been a flop so far.

I'm guessing at least some (if not all) of those rumored sub-$300 computers will be running WinRT. Microsoft better do something to improve what RT offers potential buyers if they plan to keep the brand alive past the 2013 holiday gifting season.

--Written by Gary Krakow in New York.

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Gary Krakow is TheStreet's senior technology correspondent.