MS enters innovation war

As Microsoft enters a new phase of innovation with the impending release of Windows 8 and its new products, Microsoft CEO Steve Ballmer has declared war on Apple.

Speaking in an interview with CRN, at Microsoft's Worldwide Partner Conference (WPC), Ballmer acknowledged that in the past Microsoft and its partners had “ceded some of the boundary between hardware and software” to Apple.

Ballmer added that Microsoft will not let any piece of the market go uncontested to Apple. "Not the consumer cloud. Not hardware-software innovation. We are not leaving any of that to Apple by itself. Not going to happen. Not on our watch.”

With reference to the newly-unveiled Surface tablet, Ballmer is quoted as saying the company is entering a new phase of innovation and sending a message to its competitors. "We are trying to make absolutely clear we are not going to leave any space uncovered to Apple.”

While Ballmer says Microsoft is currently focused on making the Surface tablet a success, when asked if the company would consider developing its own smartphone, he did not discount the possibility.

Microsoft unveiled the Surface tablet in June, marking the company's first attempt at integrating its own hardware and software in a product - a strategy that has been a key component of Apple's success.

The Surface tablet raised speculation that Microsoft may be seeking tighter control over the hardware for Windows 8 products. On the opening day of WPC, Ballmer, however, sought to reassure OEMs that the new tablet is just a “design point”.

“It will have a distinct place in what's a broad Windows ecosystem. And the importance of the thousands of partners that we have that design and produce Windows computers will not diminish.”

Ballmer added that Microsoft intends to have a spectrum of “stunning Windows devices” and that he is excited about the work the company is doing with its OEM partners on Windows 8.

While the Surface tablet has been praised by critics for its design and specifications, the jury is still out as Microsoft is yet to reveal pricing details. During his keynote address at WPC, Ballmer said Microsoft is hoping to sell at least “a few million” Surface tablets when Windows 8 makes its official debut in October.

Microsoft is reportedly only planning to sell the Surface in the US on launch, through a small chain of retail stores and online. This will make it difficult for the new device to come close to the sales figures of Apple's iPad. This year alone, 27 million iPads have been sold worldwide. Even before the Surface announcement, back in April, Gartner predicted that Microsoft would take 4.1% of the tablet market before the end of 2012, growing to 11.8% by 2016.

Following the initial Surface announcement, Forrester analyst Sarah Rotman Epps said while people have rightly criticised Microsoft's past failures in the hardware space, the Xbox should be noted as a resounding success.

“With the next generation of the Xbox '720' due out soon, Microsoft will have ample opportunity to bundle and promote the two products together and sell its tablets through the same consumer retail channels,” said Rotman Epps.

“This product line marks a crucial pivot in Microsoft's product strategy. It blends the Xbox first-party hardware model with the Windows ecosystem model. It puts the focus on the consumer rather than the enterprise. And it lets Microsoft compete with vertically integrated Apple on more even ground.”

However, Rotman Epps adds Microsoft will be its own worst enemy in this market. “More so than Apple or Google, the worst thing that could happen to Microsoft's Windows RT tablets is Windows 8 on x86. Selling x86-based tablets in the same retail channels as Windows RT tablets will confuse consumers and sow discontent if consumers buy x86 and think they're getting something like the iPad.

“Microsoft and its partners need to articulate a compelling strategy for how they will manage consumer expectations in the channel. Consumers aren't used to thinking about chipsets. Choice is a key tenet of Windows, but too much choice is overwhelming for consumers. Apple gets this,” said Rotman Epps.

“Microsoft won't abandon its profitable Windows licensing model; there's little risk that the future of Windows is total vertical integration. This is an experiment emboldened by the Xbox success. But in the game console market, Microsoft doesn't compete against itself.”