Microsoft's Surface strategy may force us to find another platform, says Acer

Microsoft's Surface strategy may force us to find another platform, says Acer

Summary: The manufacturer has warned that it and its rivals may need to look for an alternative platform to Windows if Microsoft seriously delves into the hardware business

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Acer head JT Wang has urged Microsoft to reconsider releasing its own Surface hardware, warning that the move will be bad for manufacturers such as Acer.

Wang became the first chief of a PC manufacturer to criticise Microsoft's move, when he told the Financial Times on Monday that Surface risked eliciting a negative reaction from the Windows firm's established hardware ecosystem. The intervention came days after Microsoft itself warned of precisely the same thing, in a regulatory filing.

Surface tablet
Acer has warned that Microsoft's Surface tablet may cause it to rethink its strategy. Image credit: CNET News

"We have said think it over," Wang was quoted as saying. "Think twice. It will create a huge negative impact for the ecosystem and other brands may take a negative reaction. It is not something you are good at so please think twice."

Surface is an evolution of the Windows PC, but also Microsoft's big hope in rivalling the iPad and Android tablets — devices that are beginning to supersede laptops for some users, albeit currently a relatively small number.

Wang's resolve may have been stiffened by a recent Microsoft blog post that described Surface as Microsoft's "new family of PCs" — previously, it was just one device that could arguably have been interpreted as a move to stimulate manufacturers to improve their own Windows tablet designs.

In the same piece, the FT quoted Acer's global PC operation chief Campbell Kan as saying Acer was debating whether to "find other alternatives" to Windows, if Microsoft was really making a serious move into the hardware industry.

The first Surface tablet — or rather, two tablets, as one will use ARM architecture and the other Intel x86 — will be released alongside Windows 8 on 26 October.

Topics: Windows, Microsoft, Tablets

David Meyer

About David Meyer

David Meyer is a freelance technology journalist. He fell into journalism when he realised his musical career wouldn't pay the bills. David's main focus is on communications, as well as internet technologies, regulation and mobile devices.

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111 comments
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  • Don't complain, do it better

    HW vendors such as ACER and many others, are already competing against Windows, all of them have dozens of Android devices for selling, saying at this time that they are "looking for alternatives to Windows" it is such an Hypocrisy.
    HW vendors failed to support the Vista launch (lack of drivers for existing hw and a poor set of new devices), for the Win7 launch things got better but once again they failed to create traction during the Win7 lifecycle and even moved their bets to Android, today HW vendors are partners and competitors at the same time.

    Win8 is one of the most important launch for MS, no other time in their history they had so much competing challenges that took away such a big slice of market share. they had to assume the control that they didn't had in prior Windows launchs, so MS elevated the HW standards with Surface and have shown a yellow card to HW vendors passing a subtle message that they expect a stronger commitment.

    HW vendors and specially ACER should not look for Surface as challenge, face it as a baseline to construct a better prime device or others that can compete with Android price, not doing so would be a serious risk as they would be left alone, people will go after the purchase of Win8 Pro and RT devices that's for sure!
    OOXML
    • Re: Don't complain, do it better

      Unfortunately, they can't afford to. Profit margins are already razor-thin--Lenovo reporting 2%, and HP publicly mooting dumping their whole PC business altogether.

      The only links in the PC chain still making a healthy profit are Intel and Microsoft. They are coining it hand over fist with nice fat margins, while everybody else has to be satisfied with dregs.
      ldo17
      • Yes they could, but so far they have choosen not to.

        Windows license costs do not set profit margins. All oems pay the same for it. If acer made clearly better hw they could charge more and enjoy higher demand and margins. Apple does this with machines that contain the same supply chain components. There was nothing stopping acer from coming out with the windows equivalent of the macbook air before apple did and making a huge profit margin on it like apple does. But they chose not to. MS was hopng with W8 tablets that the oems would grok this. But sadly no they continue to choose to offer low end hw with low margins. So MS took up the middle ground. Theres still lots of room for acer to compete with MS with much higher margins than their getting now. Hopefully they stop crying and start competing.
        Johnny Vegas
        • Apple comparison

          The major difference between MS and Apple and the cost of their machines is that Apple, aside from a couple very brief flings with other manufacturers, has controlled the hardware and software. If you want their OS then you buy their machine at a premium. So there is no competition between Apple PC makers. MS released their software to run on pretty much anybody's computer. Competition is good for the consumer but in a market with a whole pile of PC vendors trying to differentiate your machine and make anything other than a meager profit has become more and more challenging.

          With MS now getting into the PC / Tablet business I can understand the worry among the other PC vendors. MS definitely has an advantage in not having to pay itself a licensing fee for the OS and Office software. It will be hard for anybody else to compete.
          boomchuck1
          • Internal accounting mitigates this advantage

            "MS definitely has an advantage in not having to pay itself a licensing fee for the OS and Office software."

            Well, yes and no. It is true that Microsoft produces Windows and Office, so any licensing charge for the Surface tablet will be turned around and recorded as revenue to the software division. It is also still not free - millions of labour dollars go into every new version of Windows being released.


            This particular advantage is likely not as prominent as you may think. The most common accounting practise when costing a product line which sources parts internally, is to charge those parts to the product line at a price that those parts would have been sold at in the open market. Because of this, it is most likely that the build cost for the Surface tablets themselves will still include the same cost for the Windows and Office licenses that other OEMs will pay - and that cost will drive the price that will be set on the tablet.

            On the other hand, Microsoft does have the advantage of making sure each and every part that goes into the tablet is fully supported and optimized for Windows 8 in ways that other OEMs might not be privvy to. That advantage would far outweigh a $20-$100 savings (depending who you ask) on a Windows/Office license.
            daftkey
          • ah, Transfer Pricing. The GDP Killer

            You are correct, but for MS, it would be a win/win: they win when the sell to a retailer or an OEM and they win when the sale is internal.
            Whatever margin is in the OS will fall to the bottom line in either case.
            mperata
          • So, does this provide some evidence that.....

            Competition does not drive innovation and is not necessarily a good thing?
            When someone in a given market starts the race to the bottom, it's really over at that point. Some can try and stay with higher end specs and charge more, but they have to fight the stigma of being a Windows PC at that point and does it make any better business sense to do so?
            I don't know but wish one of the OEMs would try this model.
            xuniL_z
          • Agree

            I couldn't agree more. Hopefully this will Wake-up other PC venders who were just going along with the software from Microsoft trying to alter it to fit their needs. They could have done much better but they didn't and thus Microsoft said enough is enough!
            I don't blame-em
            rbwfla
        • Re: Windows license costs do not set profit margins

          They are a big factor in it, unfortunately. We saw this made clear when cheap, Linux-based netbooks first appeared: the two biggest items in the bill of materials for a modern PC are the Intel CPU and Microsoft Windows.
          ldo17
          • Back to Linux

            So why don't they start offering Linux systems again?
            eye4bear
          • Acer is saying...

            Get out of our market, or we'll switch to Android. Were I Microsoft, I would not call their bluff, because once they are there, Acer are likely to enjoy it.
            meski.oz@...
          • Because the market for Android is in...

            ... Oh yes, phones. Android doesn't have a particularly high penetration in the tablet market compared to the only real competitor the iPad, despite there being quite a few options out there. So is Acer suggesting they're not really trying at the moment? What a waste of R&D money.
            Roger Spencelayh
          • Idol17

            Bull. A license for Windows typically costs $80 or so for home premium.

            Reducing this license cost to $0 would reduce the cost of a $600 laptop to $530 and a $1299 laptop to $1219.

            This would make little difference to the buying public who will happily pay more for a laptop that is pink, or has a rotary volume knob or a 'Beats' sticker, to. There are also millions of customers who will pay 40% more for an aluminum unibody laptop.
            bitcrazed
          • economics 101

            no, reducing the licence cost to $0 would mean that laptop costs $600. The other $70 would go in the manufacturer's pockets, or allow them to put better/more hardware in the product whilst still keeping more of the profit for themselves. The PC business is such low margins that doing this would make a huge difference - if you think that the $600 laptop provides Acer with about $10-$20 profit, you realise that breaking the "you must sell with Windows" monopoly is a good thing for all.
            gbjbaanb2
      • Acer got itself trapped; no one to blame

        They are in such a poor profit margin all because they didn't try to make high quality products. Instead, they use price cut to keep their market shares. They will sure bleed to dead if they try to build touch based device for only $200-$400. However, because they set their PC price so low, people now assume a PC, built by all those familiar companies, only worth
        WillyThePooh
        • Margins?

          Apple have offered premium materials and manufacturing for not much more of a premium. I think acer has gotten away with shoddy build quality, plastic body's, money spent on useless skins and widgets that could have been invested in simplifying their range to deliver better products.
          G1NCHY
      • Nobody knows the Surface Pricetag yet.

        Has anyone ever gien some thought to the logical idea that what Microsoft may well be doing with the Surface is to in essence do the Apple play of making an expensive peice of equipment but make is a solid platform?

        They said they were only going top at least "start" selling it in Microsoft stores.

        Consider the dynamics on that play!

        Of course a rather costly Surface tablet may not be the hugest seller, but it would certainly leave the door open for the OEM's to see how close they could get to that quality for less money. It sets a high bar with a high price so now all the OEM's have to do is try like hell to build it as well as they can for a little less money and perhaps with the economy of scale some OEM's have it could be done.

        It would be a potentially great play by Microsoft.
        Cayble
    • Sound advice

      Part of "do it better" might be "replace Windows with something else". Right? :)
      danbi
      • But, there is nothing better than Windows?

        Stop being in denial. ;)
        adornoe
        • That should read: But, there is nothing better than Windows!!!

          Not having the edit feature will make your erroneous posts live on in infamy.
          adornoe