Microsoft released its long anticipated Windows 10 operating system in late July with high hopes. The OS is relied upon to help revive Microsoft and the declining PC market, and magically boost sales of PCs. While Microsoft may be on its way to realize its goal of 1 billion W10 PC by 2018, the company needs to first clear the massive Windows 8 channel inventory pile up, which is not helping anyone involved; Microsoft, manufacturers, or retailers. The fact is that no one wants to buy a Windows 8 machine and deal with the upgrade, when they can buy a brand new notebook with the Windows 10 OS pre-loaded. Many shoppers don’t even know about the free upgrade to Windows 10 and given Windows 8’s bad reputation, there is little reason for them to help clear the inventory.

As of end of August, 69% of all retail notebook placements or 77% of all Windows notebooks available in the US retail channel ran older versions of Windows. Compare this to the Windows 7 placements, which cleared at a much faster pace when Windows 8 launched in 2012, reducing to a 34% share of all notebooks or 41% of all Windows notebooks within a month of W8’s launch.

Retail PLacement Share

The Windows 8 OS, which we all know was not well accepted by shoppers, had better retail adoption at launch than W10. For example, Best Buy is usually the first to adopt a new operating system and the retailer picked up 32 unique Windows 8 SKUs by the 4th week of the operating system’s arrival in 2012, compared to only 25 W10 SKUs this year, that’s 22% fewer SKUs.

Best Buy Notebook Placement at OS Launch

Looking at it from the vendor side, let’s take the example of the US PC market leader HP. The vendor was not the first to the retail channel with its Windows 10 PCs nor does it have the leading Windows 10 notebook placement share (18% retail placement share of all W10 notebooks as of Aug 31, 2015). You may ask why? Did HP fail to deliver its execution strategy? Does HP not support Windows 10, etc. The answer is fairly simple. Timing and W8 inventory pile up.

Like the launch of the W8 OS, Microsoft again released its new OS in the middle of a major selling season. W10 came in the back-to-school season, while W8 made its arrival in the Holiday 2012 selling season. The short transition time, which is typically about three month long, was once again compressed to under one month, leading to a mismatch of inventory. Many vendors like HP don’t want to lose out sales to early BTS Shoppers and hence shipped Windows 8 PCs earlier in the season. At the same time, many shoppers chose to wait for a Windows 10 machine instead of buying a Windows 8 notebook and upgrading it, resulting in the current W8 oversupply.

On the other hand, shoppers who still had decent laptops, upgraded to the Windows 10 OS for free, instead of shelling out money on new machines, slowing sales of Windows 10 PCs.

So the end result is a glut of Windows 8 inventory, and I am not alone in thinking this way. IDC expects an 8.7% decline in global PC shipments in 2015 due to large inventory pile ups and the free upgrades. Dion Weisler, soon-to-be-CEO of HP Inc., also admitted that there are very high levels of Windows 8 inventory in the channel that will take some time to clear. I am sure this is going to require some really aggressive discounting on the older Windows 8 machines and an improved awareness of the free and mostly hassle-free upgrade to Windows 10.

Despite all the Windows 8 inventory, the good news is that user feedback for the Windows 10 OS is pretty good. It is a great operating system which is important for Microsoft to help build its ecosystem and maintain consumers’ OS loyalty. It may take time, but once Windows 8 clears from channels, Windows 10 should have a good chance of realizing its true potential.