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Laptops & Tablets

Surface Tablet May Affect Microsoft's PC Partnerships

Surface Tablet May Affect Microsoft
July 27, 2012 2:00PM

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The obvious "low hanging" market opportunity for Microsoft's Surface tablets is with business buyers that have an installed base of Windows PCs. That is precisely the same market that Dell, Hewlett-Packard and other PC vendors had been hoping to target with their own Windows 8 tablet offerings.

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Microsoft has told the SEC that its coming Surface tablets will directly compete with products made by the company's own PC partners, "which may affect their commitment to our [Windows] platform."

Approximately 75 percent of the revenue generated by Microsoft's Windows Division comes from Windows OS sales to PC vendors, Microsoft told the Securities Exchange Commission on Thursday. Nevertheless, when Windows 8 begins shipping Oct. 26, "at that time, we will begin selling the Surface -- a series of Microsoft-designed and manufactured hardware devices," Microsoft said in its filing.

The big problem for Microsoft's OEM partners is that PC growth overall remained flat in this year's second quarter. On the other hand, some industry observers believe that a major push by PC vendors to promote Ultrabooks could potentially change the market's dynamics -- and without necessarily taking a big hit from Microsoft's Surface tablets.

"Price is the key," said Mika Kitagawa, a principal analyst at Gartner. "It would be possible that there will be competition between Ultrabooks" and Surface tablets if they are both offered "at the same price point. Otherwise, it would not affect the mainstream consumer market."

Ultrabook Impact Unclear

Though the Ultrabook form factor was first introduced in late 2011, a major promotional effort didn't really kick off until the latter half of this year's second quarter, Kitagawa said.

"This segment is still in the early adopter stage," she said.

When we asked her to explain Gartner's long-term view of the Ultrabook segment, Kitagawa told us that Ultrabook's adoption by the mainstream consumer market "will only happen if the price point goes down." Moreover, Microsoft faces the same problems given that Surface is expected to be launched at a "high price point."

Though Ultrabooks will doubtlessly be one of the key products for PC vendors going forward, vendors will find it challenging to achieve success, Kitagawa told us Friday. Among other things, PC vendors will find it "hard to differentiate themselves from competitors [and the] price point has to be low," Kitagawa said.

Prior to Microsoft's late-June Surface preview, Microsoft's PC partner Dell said Windows 8 represented an opportunity for the company to generate significant amounts of revenue through tablet sales to business professionals.

"We think there's an opportunity to grow at least $1 billion in Windows 8 tablets by financial year 2016, [which] would be commensurate with our Latitude share in corporate notebooks," Dell Vice Chairman of Operations and Technology Jeffrey Clarke told industry analysts prior to Surface's unveiling. "When you look at our presence in the commercial notebook space, there's no reason to believe we can't have a similar share of commercial tablets." (continued...)

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Tell Us What You Think
Comment:

Name:

Mchale:

Posted: 2012-07-31 @ 7:01am PT
It's not going to affect the partnerships at all. This is just typical anti-Microsoft rhetoric.



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