Microsoft Corp has sold 100 million Windows 8 licenses in the six months since launch, roughly in line with the previous version, but wants to combat sputtering interest in its flagship software with a substantial update to make it easier to use, and compatible with smaller tablets.
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Windows 8 is the first Microsoft operating system primarily designed for touch commands, but it has failed to capture consumers' imaginations or make a dent in a tablet market dominated by Apple Inc and Samsung Electronics.
"Is it perfect? No. Are there things we need to change? Absolutely. We are being very real about what needs to change and changing it as thoughtfully and quickly as we can", said Tami Reller, co-head of Microsoft's Windows unit at the company's Redmond, Washington headquarters last week, where she announced the latest Windows sales figure, a number made public on Monday.
Microsoft will be rolling out an update to Windows 8, provisionally code-named 'Windows Blue', by the end of this year, Reller said. Details of the update will be released in the next few weeks.
Although Microsoft has sold 100 million Windows 8 licenses since launch on October 26, matching Windows 7 sales three years previously, it looks unlikely that the new system will see progressively rising demand, as Windows 7 did, hitting 240 million sales in its first year.
Microsoft's last Windows 8 sales update was in early January, when it broke 60 million, suggesting only around 40 million license sales in the last four months, well below Windows 7's average sales rate.
Windows 7 was helped by the fact that it replaced the generally unpopular Windows Vista, whereas Windows 8 has confused many potential customers with its new-look 'tile'-based start screen and the omission of the traditional 'start' button.
"The learning curve is real, and we need to address it," said Reller. "We're not sitting back and saying, they will get used to it."
Reller did not say whether the 'Blue' update would restore the start button, but she said Microsoft would pay more attention to helping customers adapt.
"We've considered a lot of different scenarios to help traditional PC users move forward as well as making usability that much better on all devices," she said.
Consumer alienation, and the lack of affordable touch-laptops that can make full use of Windows 8, has held back computer sales, according to industry tracker IDC. PC sales had their sharpest drop on record in the first three months of this year, plummeting 14 percent.
Reller hopes that new machines from firms including Lenovo, ASUS and Hewlett-Packard will change that this year.
"We know customers like touch laptops, but they are also price sensitive," she said. "Our partners (hardware makers) have to bet on volume, so that they get price breaks, and get that moving into the (retail) channel."
Microsoft is also tweaking Windows 8 to make it compatible with smaller seven and eight inch tablets, which would allow hardware makers to compete in the fastest-growing segment of the tablet market against Apple's iPad mini, Samsung's Galaxy Tab, Google Inc's Nexus 7 and Amazon.com Inc's Kindle Fire.
Reller declined to comment on whether Microsoft would make a smaller version of its own Surface tablet.
Microsoft has not made much of an impression in the tablet market so far, notching only 900,000 Surface sales in the first quarter, according to IDC, compared with 19.5 million iPad sales and 8.8 million Samsung tablet sales.
Overall, Reller hopes the 'Blue' update and a slew of attractive touch-laptops will fire up interest in Windows machines in all forms.
"I believe that touch will be mainstream in consumer laptops," said Reller. "I think we'll be pleased with the progress we've made by 'back to school' and by holiday (year end), we'll be at this tipping point where we will say, 'Now I see it'."
Microsoft shares closed at $33.75 on the Nasdaq, after hitting their highest level since January 2008 earlier in the session, as the S&P 500 reached an all-time high.
(Editing by Daniel Magnowski)