Microsoft May Find Sales, Profits Scarce in Hardware Business
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5. It turns Microsoft into a possible litigation target
The last thing Microsoft needs right now is to be a hardware company. By getting into hardware, Microsoft opens itself up to a world of possible hurt, including the prospect of being targeted in patent cases. Countless companies right now are being targeted in lawsuits related to smartphones and patents. Microsoft has largely stayed above the fray, targeting Android vendors instead. But with its own hardware, it might put a big target on its back.
6. Microsoft is locked in to future updates
If the Surface tablet gains any significant traction in the market, Microsoft will need to continue to improve upon the device to ensure that it stays competitive with other offerings. Thats a problem. Microsoft has now expanded its requirement to update products when Windows 8 launches. As history has shown, the company has its work cut out for it with software updates, alone. Now, the software giant will need to worry about continuing to improve its hardware, as well. Will Windows updates suffer because of that?
7. The Apple battle has taken a twist
Although Microsoft and Apple dont necessarily like each other, the companies havent really been major competitors. The only space where theyve been taking each other on has been in softwareMicrosofts playground. Now, though, Microsoft has opened a new front in that battle directly in iPhone makers wheelhouse: hardware. And as history has shown, Apple doesnt take too kindly to other companies entering the space and trying to take it down.
8. Timing is everything
In the tablet market, timing is everything. The only issue is, Microsoft doesnt appear to understand that. The company is launching a tablet years after it should have kicked things off. Its also unveiled the device months before it can launch, allowing customers to forget about it over the summer. Microsoft seems to have forgotten the importance of timing.
9. Investors are concerned
As a public company, Microsoft has a responsibility to shareholders to continue to provide value. Market analysts and shareholders will no doubt keep a close eye on Surface. If all goes well, theyll stick with the company. If things do not go well, however, look for investors to become extremely concerned and possibly start to sell off the stock. From an investment perspective, there is a lot riding on Surfaces future.
10. Costs can skyrocket
The big difference between hardware and software is that the latter typically delivers quite high margins after developers release several iterations of the product. Windows is no different. The hardware space, however, is filled with products that generate a very small profit on each unit sold. And unfortunately, hidden costs can crop up all over the place. Microsoft better watch out.
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