Does 'Surface' represent more than just a few tablets for Microsoft?

Does 'Surface' represent more than just a few tablets for Microsoft?

Summary: If the OEMs are upset that Microsoft has been working on its own tablet behind their backs, this could put them in a total froth.


In Microsoft's annual 10-K filing with the SEC, the Redmond giant suggested that building its own Surface tablet might affect their OEM partners commitment to the Windows platform. But what if Microsoft is planning more than just tablets?

Let's take another look at the wording Microsoft used in the SEC filing (emphasis added):

We derive substantial revenue from licenses of Windows operating systems on personal computers. The proliferation of alternative devices and form factors, in particular mobile devices such as smartphones and tablet computers, creates challenges from competing software platforms. These devices compete on multiple bases including price and the perceived utility of the device and its platform. [...]

Even if many users view these devices as complementary to a personal computer, the prevalence of these devices may make it more difficult to attract applications developers to our platforms. In addition, our Surface devices will compete with products made by our OEM partners, which may affect their commitment to our platform.

It says "devices," not tablets.

Now let's jump to a post made yesterday on the Official Microsoft Blog by corporate vice president for corporate communications, Frank X Shaw (emphasis added):

Fast forward a week, and head back to the West Coast – Los Angeles, in fact – where we showed off some new hardware muscle with the introduction of Surface, our new family of PCs built to be the ultimate stage for Windows. That event was certainly a kick…

That "our new family of PCs" bit certainly gives me the impression that we're talking about more here than just a few tablets.

It seems that Microsoft is doing everything it can to annoy and upset its hardware partners. Not only did it take on the job of building the Surface tablet with an as-yet unnamed OEM, but the company has also been working furiously to decouple Windows 8 sales from flatlined PC sales by pushing Windows 8 upgrades hard to existing PCs. The power that the OEMs once had seems to be dwindling, and that leaves Microsoft in a position where is has to pick up the slack and start selling.

Microsoft has also unveiled a range of touch-enabled peripherals for Windows 8. It's not unusual that Microsoft has its own peripherals, but these have a style and flair that's is unusual.

If Microsoft does indeed enter the PC market not only with tablets but also its own desktop and notebook -- and maybe even Ultrabook -- systems then it's putting its weight behind Windows 8 like it has never put behind an operating system previously. And that will undoubtedly upset the OEMs.

But so what if the OEMs are upset? Where exactly are they going to go to find an operating system to replace Windows?

Dell is once again dabbling with Linux, having just released two new high-end mobile workstations with Red Hat Enterprise along with an Ubuntu-powered developer notebook later this year. Beyond this, there's not an awful lot of love for Linux as far as the OEMs are concerned, and no real plan to take the free and open source platform mainstream.

There's also no real demand for Linux on desktop or portable systems from either enterprise users or consumers. While Gabe Newell, co-founder and managing director of the video game development and online distribution company Valve, has plans to make Linux more attractive to gamers by releasing a few games for the platform, but it's hard to see that having any real, long-term effect. Although if Valve can get its top games running faster on Linux than on Windows, that could bring the hardcore gamers over to the platform and encourage OEMs to offer performance Linux systems.

Microsoft understands that it may upset its OEM hardware partners, and while the steps the company is taking may indeed affect OEM commitment to the platform, there's not an awful lot the OEMs can do about it. It seems that they are more reliant on Microsoft than Microsoft is on them.

Image Gallery: Microsoft Surface tablet

Image source: Microsoft.

Topics: Microsoft, Hardware, Tablets, PCs

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  • PC Vendors Are Making So Little Profit

    Remember HP, the world's biggest PC vendor, at one point was discussing abandoning its PC operation altogether? And last I heard from Lenovo, it was reporting 2% net profit margins.

    The PC business is so bad, it's no wonder companies want to get out of it. Where else are they going to do? Well, you may have noticed that the ultramobile market (smartphones, tablets) is going great guns at the moment, with new, innovative products appearing practically every week. Still plenty of opportunities to make a killing there, as both Microsoft and Intel are dimly aware, somewhere in their corporate hindbrains.
    • HP and Dell cannot survive a competing Microsoft

      Once Microsoft decides they want your profits your products stop working as well with their products. This is not survivable for HP and Dell any more than it was for Lotus, Aldus, Wordperfect, Wordstar, Ashton-Tate, Borland, Novell, Netscape and countless others.

      They have no choice now. If HP and Dell want to survive they will deprecate Windows.
  • It needs to make hardware

    Windows 8 is so hardware-dependent on comfortable functionality that I would think it would need more designed by the same company. I just bought all mine within the last year or so, so they missed the boat.
    D.J. 43
  • "No real demand for Linux on desktop or mobile"???

    Linux (and Unix) are everywhere.

    What about Android??! Android is built on top of Linux just as much as Ubuntu. WebOS will be open sourced soon which is yet another Linux based OS. Also, Apple uses Darwin (Unix based) for its MacOS.

    You should check your facts so credit is given accordingly.
    • Linux is linux

      People see android as a separate operating system much like how people see OSx as Apple and not as unix.

      If OEMs started making android based PCs, they might have some success there, because consumers understand android. Most consumers do not understand Linux in any of the "pure" versions it is distributed in.
    • Linux is not really a consumer brand...

      Microsoft's OEM partners have been trying to find success with non-Windows OSes for a decade (or more) now, and just haven't been successful. They almost pulled it off with netbooks... until Microsoft got into the game & devoured the market in less than a year.

      I think there's a real chance that Windows tablets might have the same effect on Android tablets... although, Android is a much stronger brand than Linux ever was. Even so, Android tablets are really just the non-iPad right now... for consumers who don't need all the apps & don't want to pay the "Apple tax."

      The question, however, is whether Windows tablets can compete with Android tablets on price. I suspect the Surface tablets will be kind of pricey, so it will be up to the OEMs to produce cheaper Windows tablets, I suspect.
  • Alea iacta est

    I had the same impression when I read the 10-K quote in Ed Bott's article: that the term "Surface devices" alluded to a complete line of client-side hardware. This is Caesar crossing the Rubicon. Julius became Emperor, but he could as easily have gotten himself hung doing that. We'll just have to see how it goes.

    Consumer laptops and even desktops running Android would find acceptance more quickly than people think. Android is not your father's linux, it's that thing on the phone that everyone knows. I think the OEMs are not in nearly as big a pickle as Microsoft thinks they are. Selling a significant amount of hardware will - dramatically - lower Microsoft's margins. Losing 20 or 30 per cent of the consumer OS licensing revenue will lower it more. The combination could be quite a punch in the nose.
    Robert Hahn
    • @Robert Hahn

      You're conveniently ignoring the fact that there have been several Android tablets and laptops released to the market in the last 3 years.

      Few have made any significant dent in the market.

      I wonder whether Windows 8 will do to the Android tablet/laptop market what XP did to the Linux netbook market?
      • It will do exactly that. And in 5-6 years it will have done that in the

        smartphone space too. android is just too insecure.
        Johnny Vegas
      • Who knows?

        Or will Android do to the Windows 8 tablet/laptop market what it did to the Windows Phone market? These are all good questions. We'll have to wait and see.
        Robert Hahn
        • RE: We'll have to wait and see.

          Anybody that thinks they know the future because they predict their OS of choice is going to own it is simply a fool.
      • Re: "Few have made any significant dent in the market."

        Interesting, because surveys show that Android has 40% of the tablet market.

        In other words, Android is way ahead of Windows, and leaving it no room to breathe--as usual.
    • Thanks Robert

      I am now afraid, uncertain, and I have doubt. That's it. No more Microsoft products for me. You did a fine job today. Take the rest of the day off. You earned it.
      • Kneel before Zod

        You are becoming my bitch. You really need to calm down, take a chill pill, and go stalk someone else for a while.
        Robert Hahn
      • Well I like it

        Both Robert Hahn and toddbottom3 are worth reading - they may not bother much with the technical content, but even I laugh out loud (and make the cat run and hide)
    • The next big battle is Android vs Windows 8...

      Android (which is a phone OS) works on tablets because most people only use tablets for searching the web, sending emails, and casual gaming (and the same goes for iPads). Microsoft is upping the ante with Windows 8. Windows 8 tablets are productivity tools--not big phones. If Microsoft can make the argument, "Hey, our tablets are a replacement for a laptop, not a big smart phone," then they might be able to grab some significant market share.

      In the beginning, this won't hurt Apple, because many of Apple's customers are devoted & won't make the switch... but for Android customers who are frustrated that their tablet can't act like a laptop... or for new tablet shoppers who recognize the Windows brand (since it's on 90% of PCs)... a Windows tablet will be more compelling.

      We'll just have to wait and see. I suspect that Windows tablets are likely to clear the field of most of the Android tablets out there right now... and from there... they try to wedge their way into phones. Microsoft has an ecosystem that Android can't match. Google doesn't have a real desktop OS, like Apple does. This is how Microsoft and Apple may take down Google/Android once and for all. It's definitely going to be interesting to watch...
  • MS Surface = phantom

    Why all the fuss about an under-performing tablet that doesn't even exist? Unless it's priced like Android alternatives AND compatible with legacy/Android "apps" (which seems doubtful, given the little we do know about it), there's basically no reason to believe that this phantom tablet will have any discernible impact on the market.
    • Change your Mentality

      When the world around you changes you change with it don't wait for it to change u, that often requires a change in mentality and risk associated with it.
      If you wanna stay in the old age then stay and see where it takes you. The Desktop mentality is comming to an end wheather you like it or not. Microsoft might lose not but they have much to gain in ther near future unless ofcoz they decide to think like a 90 year old person and protect thier money under a mattress.
    • @lanasth

      You claim that the surface tablets are underperforming and then go on to state that they're not yet available.

      How do you know that they're underperforming if nobody has yet had a chance to run the RTM version of Win8 on the final hardware?

      And, for the record, no, nobody is waiting for Win8 and/or surface to run Android apps. They're waiting for Win8/Surface to run the apps built specifically to take advantage of all that the new OS has to offer, and in the case of the Surface Pro and x86 devices, run all their existing software as per usual.
      • @bitcrazed

        I couldn't agree more. I (and I'm sure I'm not alone in this) couldn't care less about Win8 running crappy, insecure and bug-ridden android apps. I've been trying out Win8 since the DP and am running the RP on a Windows 7 touchscren tablet since RP was released and I have nothing but praise for the system. Yes, some of the preview apps definitely need work, but Microsoft doesn't write all the apps so those problems are problems for the app provider to fix, not Microsoft, and I suspect the final version of those apps will work well, if not excellent! Android can't connect to any of the windows services that I use daily nor to my home network; in fact, I tried an inexpensive Android tablet (that's misleading since all Android tablets are cheap, uh, inexpensive) and I gave it to a friend for her 4 year old son to use. She doesn't like Android at all, but her 4 year old loves it. Even Fisher-Price is releasing an android-based tablet for kids in time for Christmas so that says a lot about the limits of android, does it not? I'll stick with something that works, even if it costs more, since I believe that spending a relatively small amount of money on a throwaway device doesn't make financial sense when, by spending substantially more gets a product that's actually usable. So, people can keep their android and its appswhile I pay more and remain happy with my purchase. I've also been using the pre-release version of Office 2013 (Office 365) and I'm a founder of a writer's workshop. We all use laptops for class and everyone wanted to know where I got the Word program, which they thought was great after I demostrated it, even the two Apple users, who said they'd seen nothing like it from Apple and since one of them is currently trying to decide whether or not to buy another expensive Apple laptop, he's ow looking seriously at a Windows 7 laptop. The other Apple user was excited to show me his new Dragon Naturally Speaking software because he can dictate his writing! I explained that I don't need an app for that since speech regonition is built into Windows. Dragon may be better, but what I have does a great job on its own.