Microsoft takes its battle with Apple to brick and mortar

commentary Microsoft is looking for the object of desire that will have people breaking down the doors at Microsoft stores and catapult Windows into mobile orbit.

Microsoft Store in Palo Alto, Calif. Microsoft

Microsoft tends to move slowly. Apple, Google, Facebook, and others have been blazing the trail into the digital future, while the 37-year old Microsoft has been inhaling their fumes. Poor Microsoft? Not exactly. The company's software continues to dominate in the old world of Windows and Office, as well as with desktop PCs and game consoles via the Xbox.

For its last quarterly earnings, Microsoft reported revenue of $17.41 billion and operating income of $6.37 billion, up 12 percent from the same quarter last year. But longer-term growth is dependent on competing with Apple's iOS and Google's Android platform for the allegiance of several billion mobile, connected humans around the world.

The laggard Microsoft has finally delivered a response to the mobile leaders with Windows 8, which is slated for an October debut. And, taking another lesson from Apple, a key part of the Microsoft Windows 8 offensive is ramping up its retail stores, with plans to have 44 opened by the end of June 2013.

"The Microsoft Store brand will become more pervasive and go out into the world," Microsoft Chief Operating Officer Kevin Turner said at the company's Worldwide Partner Conference. "More and more markets around are going to see the Microsoft Store, and this holiday on the heels of the Windows 8 launch we're going to do some holiday pop-up stores. And we're going to keep going more and more pervasive. And you'll see the store brand continue to go out into the world with the opportunity we believe we have to tell the Microsoft story."

Microsoft Store merchandise will include a selection of Windows PCs, phones, and tablets, as well as the Xbox and third-party apps and hardware. But, the stores have a long way to go to be pervasive, as Turner desires. Apple currently has 327 retail stores worldwide, which generated $16 billion in sales last year. Most of the Microsoft stores are located in upscale shopping malls. Apple burnishes its cult-brand aura with flagship stores amid high-end luxury brands and museums, as in New York City.

Microsoft Store locations (Source: Microsoft)

In any case, "pervasive" will not be enough to make a huge dent in the lead that Apple, or Google, has with mobile devices. Certainly Microsoft, and its partners, will sell billions in merchandise as the upgrade to Windows 8 takes hold. But beyond the Windows PC feast, can Microsoft and its partners make objects of desire, the kind that compel customers to camp out overnight at the stores to be first in line to pick up the latest tablet or phone? 

A happy iPad owner at Apple's flagship store in New York City Dan Farber/CBS

With the Surface, Microsoft is attempting its own Apple-like object of desire, a marriage of hardware and software, tablet and PC. It will be sold primarily through the brick-and-motor and online Microsoft Store. 

Microsoft CEO  Steve Ballmer said his goal  is to sell "a few million Surface PCs" in the coming year. For contrast, in the weekend following the Friday, March 16, 2012, launch of the third-generation iPad,  Apple sold 3 million units . Maybe he was being modest, so as not to further alienate partners who are displeased with Microsoft's new entry into the hardware space, or he doesn't think that the initial Surface will slow iPad adoption. Windows 8 phone may have an easier time than the Surface in challenging the incumbents in the coming months.

Ballmer can take great solace in IDC estimates that 375 million Windows PCs will be sold in the next 12 months. But Microsoft is still seeking the Windows 8 object of desire that will have people breaking down the doors at Microsoft stores and catapult the new Windows into mobile orbit. 

 

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