Microsoft Prepares U-Turn on Windows 8

Richard Waters
Tuesday, 7 May 2013 | 2:00 AM ET
Microsoft Corp CEO Steve Ballmer.
Getty Images
Microsoft Corp CEO Steve Ballmer.

Microsoft is preparing to reverse course over key elements of its Windows 8 operating system, marking one of the most prominent admissions of failure for a new mass-market consumer product since Coca-Cola's New Coke fiasco nearly 30 years ago.

"Key aspects" of how the software is used will be changed when Microsoft releases an updated version of the operating system this year, Tammy Reller, head of marketing and finance for the Windows business, said in an interview with the Financial Times. Referring to difficulties many users have had with mastering the software, she added: "The learning curve is definitely real."

Analysts warned that changing course would be a significant admission of failure for Steve Ballmer, chief executive, who called the October launch of Windows 8 a "bet-the-company" moment as Microsoft sought to respond to the success of Apple's iPad.

(Read More: Microsoft Is 'Not Dead Yet,' Say Wall Street Pros)

"It's a horrible thing for this to happen to your flagship product – he'll take a hit for that," said Mark Anderson, an independent tech analyst. "But he's also responsible for a renaissance inside the company. There's a level of risk and creativity going on that would never have happened two years ago."

Windows 8 Getting a Makeover
Rick Sherlund, Nomura Securities, discusses the future of Microsoft and its CEO, Steve Ballmer.

Richard Doherty, analyst at tech research firm Envisioneering, said: "This is like New Coke, going on for seven months – only Coke listened better." Coca-Cola dropped its New Coke formula in response to a consumer backlash less than three months after launch.

Windows 8 was an ambitious attempt to update the personal computer for the tablet era by moving to a new touchscreen interface based on colorful tiles, hiding the "desktop" launch screen familiar to white collar workers and consumers around the world.

(Read More: Bill Gates on Microsoft's Apple Attack Plan)

Tuesday's Market Roadmap
The "Squawk on the Street" news team reports on today's top business headlines, including Microsoft's retooling of Windows 8; Google's stock hits an all-time high; and an Internet tax bill heads to the House.

The combination PC and tablet software was widely panned by reviewers and has been blamed by some analysts for worsening the slump in sales that has rocked the PC industry. Even before its launch, Tim Cook, chief executive of Apple, said Windows 8 would be like combining a toaster and a fridge – something that, while technically possible, was "probably not going to be pleasing to the user".

Ms Reller refused to reveal details of the changes Microsoft would make to Windows 8. However, the clamor from reviewers has become overwhelming for a return to a more familiar PC interface. Ms Reller said PC users had faced difficulties adapting to the new software.

More From the FT:

Pressure has been building for Windows 8 PCs to launch the familiar desktop view when turned on – and to bring back the "start" button featured in the lower left corner of the screen in previous releases.

(Read More: How Apple May 'Get Its Mojo Back')

Microsoft has also admitted to a range of other slips with the launch of Windows 8, including failing to do enough to train retail staff and educate potential customers about the new software, as well as not focusing all of its financial incentives behind the touchscreen PCs that show off Windows 8 to best advantage. "It's very clear we could and should have done more," Ms Reller said.

Despite the slips, she said that Microsoft continued to view the software as suitable for both PCs and tablets and that "customer satisfaction with Windows 8 with touch is strong".

  Price   Change %Change


Contact Technology


    Get the best of CNBC in your inbox

    › Learn More
  • Matt Hunter is the senior technology editor at CNBC.com.

  • Cadie Thompson is a tech reporter for the Enterprise Team for CNBC.com.

  • Working from Los Angeles, Boorstin is CNBC's media and entertainment reporter and editor of CNBC.com's Media Money section.

  • Jon Fortt is an on-air editor. He covers the companies, start-ups, and trends that are driving innovation in the industry.

  • Lipton is CNBC's technology correspondent, working from CNBC's Silicon Valley bureau.

  • Mark is CNBC's Silicon Valley/San Francisco Bureau Chief covering technology and digital media.