Microsoft Can Afford Long-Term Support for Tablets, Phones

By Wayne Rash  |  Posted 2012-07-22 Print this article Print


It can also afford to sell Surface tablets at prices much lower than what Apple is getting for iPads. Right now, as was the case with the PlayStation, Microsoft needs to get the devices into as many hands as possible so that there€™s demand for software. Once there€™s plenty of software for the Windows tablet, there will be more demand for hardware. Microsoft is giving Surface and Windows 8 the kick-start that it needs. 

There are, of course, a number of questions that remain. The most obvious is whether Microsoft€™s products will be good enough that people will want to buy them in large numbers. The second question is whether Microsoft€™s competitors will be willing to stand by and let Microsoft carry out its market plans unimpeded. Chances are Google will do just that. With Apple, it€™s hard to tell. 

Google is at somewhat of a disadvantage compared with Microsoft. It€™s not exactly in the same business, Google doesn€™t make money off operating systems and software in the same way as Microsoft, and it doesn€™t yet have as much cash on hand. So while Google does indeed have a tablet, it€™s more of a reference platform than a product intended to dominate the industry. Microsoft clearly plans to sell a lot of tablets and a lot of copies of Microsoft Office 2013 and Windows 8. 

Apple is another matter. The company has about twice as much cash on hand as does Microsoft, and all things being equal, could hold out longer in a war of attrition than Microsoft. But can and will are two different things. 

This means that you have to ask questions about Apple as well. Will Apple be willing to reduce the price and margins of its signature iPad and iPhone devices to match Microsoft? Will it be able to sell enough Macintosh computers to continue its push into the enterprise against Microsoft decades-long domination? 

The answer is probably not. If Apple were interested in competing on price, it would have done so already. Instead, Apple appears to be more interested in keeping profit margins up and to keep accumulating cash, at least until stockholders start demanding a greater cut of the dividend pie. This means that if Microsoft can make the Surface tablet appear to be as good or better in value when compared with the iPad and encourage the building of Windows Phones that are as good as or better than the iPhone, Microsoft can start to accumulate market share. 

Ultimately this means that Microsoft will need to hang in there and lose money for years until the perceived value of its products convinces enough people to buy them and causes the market share to make a decided swing in Microsoft€™s direction. With patience and care, Microsoft can do this, and in the process change the market. Apple could stop them, but probably won€™t. To paraphrase an old saying€“money is thicker than water, and Apple wants money. 

Wayne Rash Wayne Rash is a Senior Analyst for eWEEK Labs and runs the magazine's Washington Bureau. Prior to joining eWEEK as a Senior Writer on wireless technology, he was a Senior Contributing Editor and previously a Senior Analyst in the InfoWorld Test Center. He was also a reviewer for Federal Computer Week and Information Security Magazine. Previously, he ran the reviews and events departments at CMP's InternetWeek.

He is a retired naval officer, a former principal at American Management Systems and a long-time columnist for Byte Magazine. He is a regular contributor to Plane & Pilot Magazine and The Washington Post.

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