The Microsoft Surface tablet has the potential to cut into sales of Apple iPads, iPhones and even Apple’s rumored TV—if the tablet is all that Microsoft says it is. Unfortunately, no one will know if that’s the case for some time.
Microsoft gave its longtime hardware partners a poke in the eye when it introduced two Surface tablets at an invitation-only event in Los Angeles June 18. While a risky move, it was a necessary one, say analysts. Microsoft needs a device that can effectively compete against the Apple iPadand so critically so that it cant trust its OEM partners to deliver on one.
The iPad terrifies Microsoft, Avi Greengart, an analyst with Current Analysis wrote in a June 19 report.
Greengarts report explains that while competing with your licensees never works, as a product could fail and then the licensor has wasted money and aggravated its partners to no benefit, Microsoft learned a strong lesson from the iPod. As early as 2005, Microsoft recognized the importance of the iPod and iTunes to Apple and went about its normal licensing to partners, but the resulting PlaysForSure was a disaster. Microsoft scrambled and responded with Zune, but too late.
Microsoft clearly does not trust its partners to compete effectively with Apple, and Microsoft feels that the stakes are too high for it to wait for Apple to cement the iPad as a laptop alternativeor give Google time to fix the problems with Android for tablets, Greengart writes.
Charles King, principal analyst with Pund-IT, said in a June 20 report that while Microsoft has a bit of a bull in a china shop reputation, its aware enough to realize how entering the hardware market could impact its partners.
Microsoft exercised an impressive amount of discretion leading up to the Surface event. Still, King wrote, The melodramatic notion that OEMs would somehow be deeply surprised by Surface is, frankly, a bit shallow.
However, Roger Kay, an analyst with Endpoint Technologies, says while they knew, they may not have known much or very far in advance. Many of the OEMs are his clients, and he prodded them after the announcement to gauge just how much they knew. Kay told eWEEK, while no one wanted to discuss it much, none had received very much notice. Someone said, Oh, [Microsoft CEO Steve] Ballmer called me just before his speech.
During its presentation, Microsoft was effusive with some detailsthe Surfaces case is magnesium and formed from a physical vapor deposition processand stingy on others. Kay called it, for now, a straw product, a placeholder. But if its as good as it looks, it could have major implications beyond cutting into iPad market share.
Greengart points out that a hit Surface tablet could drive sales of Windows Phone 8 smartphones and help lock consumers into Microsofts cloud services that span both devices, by familiarizing consumers with the Metro interface and by encouraging app developers to target the platform (which has many similarities to Windows 8).
Pund-ITs King notes that integration with the Xbox is also a no brainer. Using the Surface for Windows RTthe consumer version of two introduced Surface tabletsas an interface for Xbox makes perfect sense for several use cases, including Kinect.
Remember that Microsofts Xbox installed base is estimated to be around 70 million, or roughly the same as Apples iPad installed base, wrote King. If Microsoft can convert a sizable number of media-savvy Xbox owners into Surface customers, it could cut deeply into the potential audience for [the rumored] Apple TV.
Kay says the Surface seems impressive. Halfway through live blogging, he jokes, one could hear the invited analysts and journalists cracking open and oozing enthusiasm. Still, hes skeptical.
They have to prove to me they know how to do things the not-boneheaded way, said Kay, explaining that one only gets to know a Microsoft device after living with it. Even at this late date Microsoft doesnt understand that you cant interrupt the user experience to do some housekeepingyoull be trying to get down the fantastic opening line of your great American novel before you forget it, and Microsoft will interrupt to say you should perform a virus scan.
Still, if its as good as they say it is, that will change the game, said Kay. It could also drive many of the OEMs out of the game, if Microsoft takes the crÃ¨me de la crÃ¨me off the top and leaves everything else for the OEMs, who are already making lousy margins.
Kay also points out that Microsoft will have to figure out its distributionanother area where its prone to goof up and where Apple has become a finely oiled machine. After Tim Cook joined the company, he says, everything got a lot tighter. They havent made a major execution mistake in at least a decade.
Microsoft hasnt yet shared a release date for the Windows RT Surface, though October is widely speculated; the Windows 8 Pro version will ship three months after the mystery release date of the RT version.
Greengart notes that despite all the vagaries, Surface is the most competitive general-purpose tablet weve seen from anyone other than Apple. Sadly, he adds, that is not a very high bar to cross."
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Michelle Maisto has been covering the enterprise mobility space for a decade, beginning with Knowledge Management, Field Force Automation and eCRM, and most recently as the editor-in-chief of Mobile Enterprise magazine. She earned an MFA in nonfiction writing from Columbia University, and in her spare time obsesses about food. Her first book, The Gastronomy of Marriage, if forthcoming from Random House in September 2009.