Windows Blue and the Rise of Ultramobiles

Later this year, Microsoft will introduce an upgrade to Windows 8, code named Windows Blue. It will be quite an important update to the current version of the company's PC operating system.

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There was a very important industry forecast from Gartner that came out last week, which basically said that we would continue to see a decline in traditional PC and laptop demand and instead see huge growth in tablets and smartphones. However, they had another growth segment in the forecast that’s quite interesting: They predict that the industry will sell 25 million ultramobile devices this year and up to 96 million in 2017.

If you have seen a Microsoft Surface Pro or a large tablet with a screen that detaches from a keyboard, these are what some PC makers call ultramobile devices. We also see smaller-screen clamshell notebooks being defined as ultramobiles as well. While laptops in the traditional sense, they are fully functional mobile devices that in most cases can be used for media consumption as well as productivity. While this segment is still a small part of the PC market today, Gartner believes that they will be a major part of the PC market over the next two years.

I believe this forecast for ultramobile devices is actually conservative. The reason is that later this year, Microsoft will introduce an upgrade to Windows 8, code named Windows Blue, and it will be quite an important update to the current version of the company’s PC operating system. For the first time, Windows 8 will be able to be used on smaller tablets in the seven- to eight-inch range, which will finally let Microsoft compete directly with Apple’s iPad Mini and the smaller tablets from Amazon, Barnes and Noble, Google and Samsung, among others. At Creative Strategies, we are forecasting that by 2015, tablets eight inches and smaller will account for about 65% of all tablets sold worldwide.

But the ultramobile device form factors for which Windows Blue could really boost market demand are the ones that could sport 11.1- or 11.6-inch touchscreens and be designed like a more traditional laptop, although quite thin and light in actual design. Some will be clamshells, while some will have detachable screens. People aware of these new products have often used the term Netbook 2.0 to describe them, but we hear they will be far from the netbooks of the past. Indeed, these will be fully loaded Windows 8 touch-based laptops that will be priced under $549, with most coming out around $499 by this holiday season. The goal is to get them even lower in price by early next year.

This particular version of Windows 8 will be priced very aggressively for PC makers. In fact, we hear that PC makers will only have to pay $30 instead of the $75 to $120 per copy when used on more robust and more powerful laptops and desktops. We understand the caveat for getting this price is that this version of Windows 8 can be only used on tablets 11.6 inches or smaller and in ultramobile clamshell-like laptops that use Intel’s Atom chips or similar ones from AMD. While these processors are at the entry level of mobile computing chips, they have become much more powerful and energy efficient, and will work fine for most users’ basic computing needs. More powerful systems will be able to use Windows Blue as well, but PC makers will only get the discounted price on systems that meet the above specifications.

There is another reason that a thin and light fully loaded touch-based Netbook 2.0-like clamshell will be attractive to many consumers. Our research continues to show that people can use tablets to do about 80% of what they used to do on a laptop or PC. They also tell us that in cases like this, they will either extend the use of their current laptops or PCs or buy cheap laptops or PCs instead, considering that these computers are now only being used 20% of the time for what I call heavy lifting productivity tasks. These are things like managing media, handling personal finances, and writing long e-mails or documents.

With this in mind, I believe that we are about to launch the era of what I call “good enough” computing. For the majority of consumers, the need for more powerful PCs or laptops, given their use of a tablets as their primary computing devices, becomes less important. Their current laptops or PCs or a low-cost thin-and-light touchscreen laptops could become good enough to meet their computing needs.

This is why I am pretty bullish on the overall ultramobile mobile computing category. Interestingly, demand for really powerful laptops in the $999 to $1499 range has still been robust since almost all enterprise buyers are opting for PCs and laptops in this price range. However, we see consumers looking to buy more of the cheaper versions of PCs and laptops that are good enough to meet their needs, along with a tablet which becomes a bigger part of their overall computing footprint.

With Windows Blue and its use on 11.1- and 11.6-inch thin-and-light touch-based clamshells priced under $499, I see these types of ultramobile laptops gaining a lot of ground with consumers. This does not mean that some consumers will not want laptops with much larger screens and more powerful processors, but I do believe that for most, these smaller, lighter touch-based laptops will be “good enough” to meet most of their needs and become a big hit this holiday season.

Bajarin is the president of Creative Strategies Inc., a technology industry analysis and market-intelligence firm in Silicon Valley. He contributes to Big Picture, an opinion column that appears every Monday on TIME Tech.