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    Microsoft Tablets Could Cannibalize Windows PCs: Analyst

    Written by

    Nicholas Kolakowski
    Published July 30, 2010
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      If Microsoft pursues its strategy of Windows 7-equipped tablets, one analyst suggests the company could risk cannibalizing the traditional Windows 7 PC market.

      During Microsoft’s July 29 Financial Analyst Meeting, Microsoft CEO Steve Ballmer acknowledged that the Apple iPad had a substantial head-start in the tablet market, but also suggested that Microsoft had its own plans for the space.

      “Apple has done an interesting job of putting together a synthesis and putting a product out,” Ballmer told the assembled analysts, according to a transcript provided by Microsoft. “They sold certainly more than I’d like them to sell, let me just be clear about that.”

      According to Ballmer, the pieces exist for Microsoft to make a substantial foray into the tablet space. “We have a lot of IP, we have a lot of good software in this area, we’ve done a lot of work on ink and touch and everything else-we have got to make things happen. Just like we had to make things happen on netbooks, we’ve got to make things happen with Windows 7 on Slates.”

      By deciding to install Windows 7 on tablets, Microsoft draws a philosophical line in the sand with other tablet players, who seem to be choosing smartphone operating systems for their own devices: Apple loaded the iPad with a modified version of the iPhone operating system, and other hardware manufacturers are considering either Google Android or the Palm WebOS-both originally built for smartphones. According to one analyst, Microsoft’s choice to go with its operating system intended for desktops and notebooks, as opposed to its upcoming Windows Phone 7 OS, could have been the result of internal maneuvering.

      “It is clear that they understand both the threat and opportunity presented by tablet,” Al Hilwa, an analyst with IDC, wrote in a July 30 e-mail to eWEEK. “It looks like there was a big battle internally and the Windows folks won over the Windows Phone 7 people, who probably were deemed as having their work cut out for them shipping a basic Windows Phone 7 on time.”

      But choosing Windows 7 for tablets, Hilwa added, could have an unintended consequence.

      “I think we will see a world of many form factors competing, but if the machine looks and smells too much like Windows, it will mostly cannibalize Windows PCs,” he wrote. “To hit the iPad market they need a content consumption strategy that is iTunes-like, an application development model that leverages the phone system to get critical mass, and devices that are more like phones in their simplicity than PCs.”

      But streamlining doesn’t seem to be on Microsoft’s tablet agenda.

      “We think about these devices, and I don’t think there really is one size fits all,” Ballmer said. “Some people are going to want a device that is screen and keyboard that spins around for inking purposes. Some people are going to want things very light or very cheap or very expensive or very powerful. All of those things are going to be important, and we’ve got a push right now.”

      Other executives have suggested that tablets have the potential to cannibalize the PC market.

      “If it turns out that the iPad cannibalizes PCs that, I think, is fantastic for us because there is a lot of PCs to cannibalize,” Apple COO Tim Cook said during a July 20 earnings call. “It’s still a big market.”

      Nicholas Kolakowski
      Nicholas Kolakowski
      Nicholas Kolakowski is a staff editor at eWEEK, covering Microsoft and other companies in the enterprise space, as well as evolving technology such as tablet PCs. His work has appeared in The Washington Post, Playboy, WebMD, AARP the Magazine, AutoWeek, Washington City Paper, Trader Monthly, and Private Air.

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