Windows 8, Tablet and Nokia Rumors Dominated Microsoft's Week

Microsoft's week was dominated by the first official glimpse of Windows 8, along with rumors surrounding Nokia and tablet manufacturers.

Microsoft's major news this week was the unveiling of its next-generation Windows.

Code-named "Windows 8" for the time being, this version of Windows has a completely different look and feel than previous editions of Microsoft's long-running operating system franchise. In place of a desktop loaded with folders and icons, married to a bottom file bar for displaying open applications, Windows 8 centers on large, colorful tiles displaying active information.

If anything, Windows 8 resembles Windows Phone, which also features a tile-centric user interface. Microsoft intends the operating system for play on everything from tablets to full-sized desktops, with the accompanying raft of features: support for legacy applications such as Office, multitasking, access to a "traditional" Windows file system, and an all-new Internet Explorer 10. Users will be able to "snap" applications to one side of the screen, an evolution of the "Aero Snap" feature already present in Windows 7 and Windows Vista. For those on a laptop or desktop, a mouse and keyboard substitute for touch controls.

Microsoft has posted a demonstration video of Windows 8 in action on its Website.

"This represents a fundamental shift in Windows design that we haven't attempted since the days of Windows 95, presenting huge opportunities for our hardware partners to innovate with new PC designs," Mike Angiulo, corporate vice president of Windows planning, hardware and PC ecosystem, reportedly told the audience during a June 2 demonstration at the 2011 Computex conference in Taiwan.

At nearly the same time, Windows and Windows Live president Steven Sinofsky was offering a small Windows 8 walkthrough at the D:All Things Digital Conference in Rancho Palos Verdes, Calif.

In both presentations, Microsoft executives made the choice to highlight Windows 8's tablet functionality, particularly the touch interface. That could counter rising criticism that Microsoft has no strategy to counter Apple's iPad or the growing family of Google Android tablets. However, with Windows 8 rumored to hit store shelves in late 2012, Microsoft will still have substantial ground to make up in that category.

The other question is how Windows 8's radically different look and feel will work for desktop and laptop power users, who have generally spent decades becoming versed in the intricacies of previous Windows editions.

Speaking of tablets, rumors emerged this week that Microsoft is attempting to keep its manufacturing partners on a tight leash when it comes to building those devices for Windows.

Those rumors stemmed from a June 1 article in The Wall Street Journal, itself quoting unnamed "people familiar with the matter," which said that Microsoft wants five chip makers to each pair with a single tablet manufacturer. The chip makers include Intel, AMD, Nvidia, Texas Instruments and Qualcomm, which would eventually be allowed to expand beyond that single partner.

If confirmed, and if the various chip makers and manufacturers agree to that sort of setup, it would serve as yet another example of Microsoft's attempts to keep its mobile devices from fragmenting into a bewildering galaxy of different hardware and software options-something the company claims will ultimately harm its archrival Google's Android franchise.

Microsoft has followed a similar strategy before. With Windows Phone, the replacement for the increasingly antiquated Windows Mobile, Microsoft kept its hardware partners to a strict set of minimum hardware requirements, including a 5-megapixel camera and 1GHz processor. All Windows Phone devices also share a touch-screen and three primary hardware buttons. With that foundation in place, some hardware manufacturers then decided on some additional hardware tweaks to make their devices stand out in the marketplace. For example, the Dell Venue Pro offers a physical QWERTY keyboard.

However factual that manufacturing rumor turns out to be, Microsoft also found itself confronted with a more outlandish one this week: that the company intends to purchase Nokia's mobile phone business for around $19 billion.

Russian blogger Eldar Murtazin, known for his digging into Nokia's affairs, tweeted May 31 that: "One small software company decided last week that they could spent 19 bln USD to buy a part of small phone vendor. That's it."

That was enough to activate online chatter and speculation, despite a Nokia spokesperson telling Reuters, "These rumors are 100 percent baseless." Nonetheless, Nokia's tumbling stock price helped give the rumors some added gas. Microsoft already has a deal in place to port Windows Phone software onto Nokia's smartphones, in exchange for roughly $1 billion over five years.

"We would continue to avoid the stock as Symbian smartphone sales are falling off faster than expected, and we are skeptical that new Windows Phone (WP) models will be able to replace lost profits," Stephen Patel, an analyst with Gleacher & Company, wrote in a May 31 research note. "Our checks suggest mixed carrier support for Nokia's transition to WP."

Moreover, he voiced worries about Windows Phone's ability to substitute Symbian's marketplace role with little attrition: "We remain concerned that WP industry sales remain below 2mil units/quarter and that [Nokia's] scale will not be enough to offset a faster-than-expected drop-off in Symbian phone sales."

Other analysts see the Microsoft-Nokia deal as an outright win for Apple and its iOS ecosystem-particularly if Microsoft purchases all or part of its new partner for the aforementioned $19 billion.

"We believe Nokia is a great source of market share opportunity for Apple," Brian White, an analyst with Ticonderoga Securities, wrote in a June 1 research note. "Microsoft's myopic approach outside the PC market is likely to provide more of a drag for Nokia's mobile phone business and uncertainty for customers, allowing Apple's iPhone to gain even further market share in the coming quarters, in our view."

In other words, even without the task of acquiring and absorbing a massive company, Microsoft already has enough of a challenge ahead of it in mobility-not to mention in prepping a whole new operating system for launch.