Microsoft and OEMs: New game, new rules

PC makers and Microsoft have enjoyed a mostly stable relationship that has lasted for some three decades. But times, and competition, have changed. Microsoft's latest moves are a sane reaction to partners that have drifted away.
Written by Ed Bott, Senior Contributing Editor on

Every relationship changes over time. That’s true of friendships, love affairs, and business partnerships.

In business, at least, it should be possible to keep emotions out of the equation. But that’s not always as easy as it sounds.

And that’s where the tension comes in with Microsoft’s decision to cross the line into PC design and begin competing with its OEM partners.

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My colleague Jason Perlow is livid at Microsoft for that decision. The announcement of Surface, Microsoft’s distinctive new line of tablet devices, marks the resurgence of the Evil Empire, he argues, and a return to Microsoft’s monopolist roots.

I beg to differ.

Yes, PC makers and Microsoft have enjoyed a mostly stable relationship that has lasted for some three decades. But times, and competition, have changed.

Jason wants Microsoft to remain loyal to those partners. But loyalty is a two-way street. And just how loyal to Microsoft have those OEMs been in the last few years?

The number-one PC maker in 2010 was HP. So what did they do in 2011? Well, first they bought WebOS, which could have been a serious competitor to Windows, and announced that it would be a key component of their PC strategy. And then, in August 2011, they announced they were planning to exit the PC business completely.

I remind you: this is Microsoft’s number-one PC partner.

That didn’t work out so well, of course, and two CEOs later HP has dumped WebOS and reaffirmed its commitment to the PC business. But still, when your longtime partner tells you “I’m just not that into you anymore,” how should you react?

And we can run down the list of other hardware companies and find equally fragile, strained relationships:

Dell and Lenovo are building Android tablets. The CEO of Asus just stood on stage at Google I/O to show off its new Google-branded tablet. Samsung makes the Chromebook and an Android-powered tablet that is so close to the iPad that it’s been banned for import into the United States by a Federal judge.

In short: The days of the exclusive OEM-Microsoft partnership are over.

Frankly, I see Microsoft’s hardware moves as defensive, not aggressive. It has opened a dozen or so retail outlets  (with plans for 75 more) and an online store, where it sells products made by its OEM partners. The key differentiator is that a PC you buy at the Microsoft Store isn’t loaded with crapware.

Check out my detailed side-by-side comparison of OEM PCs versus identical Microsoft Signature models. It’s an eye-opener:

Surface is an experiment. I don’t know what Microsoft’s sales projections are. Certainly they would like it to be a billion-dollar business, but I suspect they would be ecstatic if these first two models picked up even 1% of the total PC market in 2013.

But let’s be real: PC OEMs are the ones who have been drifting away from Microsoft in recent years. The players and the game have changed. And the idea that Microsoft can build a brand-new monopoly from scratch frankly stretches credulity past the breaking point.

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