Lets catch up on some news. First up, a tablet. So Microsoft announced its tablet PC. Its called the Surface and not very much is known yet. So Microsoft continues on its path from being a pure software maker to one that does both software and hardware. The Surface follows on the footsteps of the Xbox say the optimists. Or follows the path of Zune and Kin, say the pessimists.
I am not a tablet PC expert but of course I monitor that space of course as its a hot growth area in the digital convergence opportunity. And the tablet saga with Microsoft is a bit strange. First, obviously, it means that Microsoft now goes directly against its primary hardware suppliers - the big PC makers who use the Windows operating system, like Dell, Acer, Toshiba etc. While MS has done hardware before, it has not so far gone directly against product lines of its primary hardware suppliers. This is no doubt annoying to the hardware guys and we have seen plenty of press stories about that angle.
What of the timing? Microsoft had wanted tablets to the Windows Phone 7 and Windows 8 ecosystem(s). They urged Nokia to get into it and we had strong rumors from Nokia that they might expand their product offerings from just making phones, to also adding a tablet or tablets. (I was very critical of that move, it now seems like Nokia has shelved those plans as Nokia is struggling so much in its primary business). My gut says the two are linked. Microsoft started to urge Nokia to release a tablet right after it joined the Windows Phone alliance. Nokia started issuing statements in that direction also immediately. They were consistently met with hostility by Nokia analysts (for good reason). Now that we heard of the severe problems at Nokia, and it suddenly stppped talking of tablets in June (Nokia still promoted the tablet idea in early May at the Shareholders Meeting) - this may have been the point where Microsoft simply decided, the Windows 8 ecosystem needs a tablet, and if Nokia ain't gonna make it, then Microsoft will do it by itself.
I would not be surprised at all - and hopefully we'll find out at some point - if the Taiwanese manufacturer Pegatron was originally planning to manufacture this same device under the Nokia brand, and after Nokia said no, Pegatron just pitched the same hardware at Microsoft and what we're now seeing, is the same device Nokia would have introduced as its own Tablet. Like I said, this is pure speculation at this point, but the timing and rushed nature of Microsoft's announcement seems to suggest the two are tied. Nokia and Microsoft close cosy relationship seems to have cooled a lot since May when Elop admitted to the Nokia Shareholders that all brands of Windows Phone smartphones are suffering from a carrier boycott because Microsoft bought Skype. (If that sounds weird to you, as Skype obviously exists on rival smartphones, please read this - why carriers hate Skype). So the fuzzy-warm feeling between Microsoft and Nokia now seems like so last year, and Microsoft seems to have grown tired of Nokia and decided it can go it alone (also relating to the rumors of a Microsoft-made smartphone)
Obviously the tablet space is owned by Apple's iPad. This is also a strange move by Microsoft. They have recently taken on Apple - with Zune (vs the iPod) and lost. Microsoft's hardware success with Xbox was against Sony (and Nintendo). Looking at how much many first-time PC makers from other industries have struggled with tablets - like Motorola and RIM - this also is a highly perilous move by Microsoft. They can't really afford to be seen to fail in this venture. But the tablets space is owned by Apple and Microsoft does not bring strong assets into this fight. Why pick Apple's strongest suit as the area you want to pick a fight? Why not go somewhere, where perhaps the synergies might be stronger and rivals weaker - like say the home set top and gaming and TV environment perhaps. Who knows. But the tablets space is awash with victims of Apple - Blackberry, HP, Palm, Motorola..
Which brings me to the question, where were the other tablets for Microsoft's wireless offerings? After we saw the highly successful iPad and how strongly it contributed to Apple's profits, you'd think many current Microsoft PC makers would adopt the Windows based tablet platform. I find it curious that Android has so many tablets but not Windows (so far). And why were Microsoft's current equipment partners so hesitant to release tablets running any variant of Windows recent or new, but happy to do so on other platforms, especially Android?
My gut says this was a strategic mistake. I think that Microsoft had already been alienating its 'partners' in the equipment side with decades of a dictatorial attitude and constant feuding and lawsuits. Microsoft's equipment partners were willing to make traditional keyboards and mice -based Windows traditional PCs on desktops, laptops, netbooks, but not in tablets (and increasingly refusing to make Windows based smartphones either). With Microsoft releasing a tablet now, I think Microsoft crosses a line it cannot recover from - it blatantly goes against its equipment-maker rivals and that will not help, it will only hurt Microsoft. This will not entice those manufacturers to provide tablets for Microsoft and Windows 8 (as there are many alternatives, especially Android). It will scare them even more away from providing Windows based smartphones (into Android and later this year, Tizen). And in the long run, they will seek rival solutions to power their traditional PCs. Haha, the really Machiavellian move by Apple would be to issue a low-cost license version of the Mac OS and lure in HP, Dell, Lenovo etc to release Macintosh-compatible PCs. But honestly, I don't see that happening, the risks to Apple's brand purity are too big.
Meanwhile, there also are now rumors that Microsoft will also do a smartphone but I'll deal with that on the Nokia-related Windows 8 news blog next.
Can the Microsoft tablet succeed? I think it will see headwinds, Microsoft is wealthy, it can throw a lot of money at this project. Microsoft can almost guarantee enough sales not to be seen as a failure in the start. The good news, compared to Windows Phone and Nokia Lumia launches, is that with tablets, Microsoft is not hostage to the whims of the carriers/operators. But it still means very solid marketing from product design to pricing to marketing promotion to retail channel distribution to aftercare.. Microsoft can succeed with this, witness Xbox but it can also fail, witness Zune. My guess is that the first edition Microsoft tablet will do ok, but will suffer over time, being more a Zune than an Xbox. In the longer run, I think the Surface tablet line will be seen as a perennial drain on Microsoft profits, and quietly dropped a few years from now.
But lets see, like I said, this is not my core competence. It is a huge change in Microsoft partnerships strategy, however, to compete directly with suppliers who buy licensed products from Microsoft. That will not be good for the long term reputation in any partnering that Microsoft does, or attempts. The Evil Empire has just become More Evil. And its partners will take note, and they have long memories. Ballmer is likely going to regret this decision over time.