Sales of Windows 8 are far from what Microsoft hoped. Early signs from companies like Net Applications are dismal -- and some Microsoft partners are complaining about missing targets.

Only 1.7 percent of desktops, notebooks and laptops that were connected to the Web in December were Windows 8 machines, according to Net Applications. That compares with a 21 percent market share for Windows 7 during the same point in its lifecycle. That means, roughly, Microsoft is off to a 20 percentage-point slower start with its re-imagined Windows.

"Now it's clear: Windows 8 did not blow the doors off during the holiday," said Roger Kay, principal analyst at End Time Technologies Associates. "In context, this tepid launch is just one of a litany of failures fast relegating Microsoft to the status of incidental spectacle in the information technology business."

Is Microsoft Blind?

As Kay sees it, Microsoft has reached an "Orwellian impasse" in which the company cannot tell the truth -- even to itself. Kay told us Microsoft is blinded by its own hallucinations about how the market is operating. The result, he said, is that its pronouncements entirely lack credibility.

Even its partners aren't fully backing the new Windows. Fujitsu is missing its annual shipment target for personal computers in the face of tepid demand for Windows 8 PCs. Fujitsu President Masami Yamamoto told reporters in Tokyo that appetite for the new operating system was "weak," according to Bloomberg.

"We can't be optimistic about the PC industry," Bloomberg reported Yoshihisa Toyosaki, a Tokyo-based analyst at Architect Grand Design, an electronics research and consulting company, as saying. "PC makers' bet on Windows 8 has failed, as cheaper tablet computers are taking away customers."

NPD Group reports that U.S. retail sales of devices running Windows dipped 21 percent year-over-year in the month following the Oct. 26 release of Windows 8. NPD said a 24 percent drop in notebook sales fueled the decline and Apple and Android were beneficiaries.

Craig Mundie Shifts Roles

Meanwhile, Craig Mundie is stepping away from his role as chief research and strategy officer at Microsoft into what Redmond is calling "senior adviser to the CEO."

"In this role, he works on key strategic projects within the company, as well as with government and business leaders around the world on technology policy, regulation and standards," an updated biography on Microsoft's Web site said.

Microsoft CEO Steve Ballmer announced the move in a Dec. 14 internal memo that The Wall Street Journal's AllThingsD blog published. In the memo, Ballmer wrote:

"Over his career, Craig has brought great value to the groups and initiatives he has started and overseen and now brings that wealth of experience to his new role. Craig has also been instrumental in building relationships with governments and policymakers around the world."