Microsoft has learned (the hard way) that it cannot sit idly by anymore hoping its partners such as Dell and Hewlett Packard will develop effective hardware. Microsoft now seems ready to become more proactive in its bid to compete with Apple.
Fred Blocher/The Kansas City Star/AP
The most interesting tech story happening beneath the surface - to me anyway - is about how Microsoft has essentially given up on its hardware partners and has decided to be more proactive in the war on Apple.
Redmond, Washington has awoken and the furnaces have been jerked into life, steam and smoke appear above the forest's treeline. And it's a good thing, because it's getting past the point where it will matter anymore.
Microsoft has learned (the hard way) that it cannot sit idly by anymore hoping Dell and Hewlett Packard (and to a less extent Nokia) will come up with the hardware that will showcase its software admirably enough to get some traction in what the PC guys call "alternative devices." Anyone not living in a secret terrorist compound in Northeastern Pakistan knows that there is nothing "alternative" about tablets - they are replacing PCs, plain and simple, and Microsoft increasingly finds itself as the king of operating systems for yesterday's device.
So how far with Microsoft go on the hardware side? I think pretty far. They certainly have the capital and the relationships and the gumption (historically, anyway) to really go for it. But what does that mean for their partners at Dell at HP? Are they now competitors?
Here's Tiernan Rey writing for Barron's Tech Trader last week:
Microsoft did little to tame speculation about competition. CEO Steve Ballmer, presenting the Surface on stage, talked out of both sides of his mouth.
He said Microsoft remains committed to its hardware partners. But he also took a page from the late Apple (AAPL) founder, Steve Jobs, declaring that people's interactions with machines are better when "all aspects of the experience—hardware and software—are considered in working together." That's a major shift from Microsoft's classic approach of selling Windows as the software engine anyone can license to make a great machine.
A person close to Microsoft tells me competition may be more limited than it appears. Microsoft wants to push the entire Windows "ecosystem" forward, the person tells me, to prompt hardware partners to design better machines.
Sure, for now. Rick Sherlund, who follows Microsoft for Nomura Equity Research, believes competition between Microsoft, HP and Dell will prove all too real, because "we are in a new world," as he puts it. Microsoft, he told me last week, cannot afford to leave its battle against Apple's iPad to the fumbling of the PC makers.
Will Microsoft's ambitious entry into hardware mean a competition-driven renaissance for the box-makers they used to rely on? That would certainly be the optimistic case and perhaps the thing Apple (and Google) would fear most. Or does it simply mean a more brutal environment for gadget and device makers in general?
One other thing I came across that lends credence to the latter view - here's Ina Fried on a pretty noticeable departure at MSFT in All Things D:
The head of Microsoft’s unit responsible for interactions with PC makers is shifting jobs.
Steve Guggenheimer, a longtime Microsoft veteran, will move to a new, unspecified role at the company. Bloomberg quotes a Microsoft spokesman as saying that Guggenheimer would take a sabbatical before taking on the new role.
The move comes just days after Microsoft introduced the Surface tablet, its first effort to compete with its computer-maker partners in the market for Windows computers. A version of the Surface running chips from Nvidia is due to ship around the same time that computer makers release their own Windows 8 machines.
Computer makers are said to have been given only a very limited heads-up on what Microsoft was planning, and sources say many companies are unhappy to find themselves competing against their software provider in the tablet market — one they had hoped would provide a new growth opportunity.
My conclusion is that this kind of thing makes HPQ, DELL, NOK and anyone else making hardware "for" Mister Softee an uninvestable company. Ballmer's grown impatient with his partners and there's no telling what the company's product roadmap may actually mean going forward.