Why Microsoft built its own tablet -- think Apple and Xbox

Microsoft has so far avoided irritating manufacturers that churn out Windows PCs, tablets, and phones. But the game has changed with mobile devices.

Microsoft Surface with a 10.6-inch display

In the last century, while Steve Jobs was anguishing over the look of a bevel on the Macintosh, Bill Gates, rocking back and forth, figured out how to achieve world domination for Windows. Gates handily won, applying his business-friendly, partner-with-PC-makers formula to render Apple a bit player. Even today, Microsoft has more than 90 percent market share of desktops, compared with 6 percent for Apple.

But in the mobile world, the roles are reversed. Microsoft is barely a blip on the mobile scene, while Apple and Google are running away with the fast-growing market. The number of mobile Internet users is expected to exceed desktop Internet users beginning in 2014, according to ComScore.

Microsoft got the message in introducing the Surface line of mobile devices , taking a page from Apple's total-control product strategy and its own Apple-like approach to the Xbox over the last decade. Microsoft Xbox, which follows Apple's vertical-integration formula, now has a near 50 percent share of the U.S. console market, with 67 million units sold since 2005, according to Microsoft.

Historically, Microsoft has not wanted to step on the toes of the manufacturers that churn out Windows PCs, laptops, tablets, and phones. That hands-off approach may be about to change. After years of Apple envy, Microsoft has finally come up with a device (and platform) that looks like it can compete with Apple, as well as the myriad devices running Android and the forthcoming Windows 8.

Hardware manufacturers, such as Dell and Lenovo, which build Windows-based computers, may not be pleased with Microsoft's decision to built its own branded, unique hardware. Perhaps, Microsoft will throw them a bone and give them the designs and specs and a promise not undercut them on price to reduce. We are still waiting to hear back from some of those hardware makers to get their side of the story.

The tablet and ultraportable form factors are especially fertile ground in terms of growth and innovation. A recent Online Publishers Association study found that 31 percent of the U.S. Internet population (74.1 million users) own tablets, up from 12 percent in 2011. By 2013, the study projected that 47 percent of the U.S. Internet population (117.4 million users) would own tablets.

At this juncture, Google's Android platform (including Amazon's Kindle) and Apple's iOS are splitting the market. Apple's continuation of its firm grip on hardware and software integration is working exceedingly well, as evidenced by the company's incredible financial success.

(Credit: OPA)

Google gives its Android platform to partners for free, which leads to some fragmentation and a fraction of the profits Apple is generating. Like Microsoft, Google plans to introduce its own branded tablet this month . Microsoft expects that it can generate some buzz and give Windows users a legitimate alternative to Apple's iOS and Google's Android, as well as incent its developer community to build native apps for its platform.

As Microsoft CEO Steve Ballmer said during the Surface launch, "We designed Windows 8 for the world we know, in which most computers are mobile." The Surface is vehicle to drive Windows 8, especially as Windows users move off the desktop.

Microsoft CEO Steve Ballmer holds the Surface Josh Lowensohn/CNET

On the smartphone front, Microsoft also has a Sisyphean task ahead to unseat the incumbents. The research firm IDC predicted that Windows Phone will catch up to Apple's iPhone, attaining 19.2 percent market share in 2016, growing from 5.2 percent this year. IDC attributed Microsoft's growth to demand for Nokia's Lumia Windows phones in emerging markets. However, if Nokia is the key for Microsoft's smartphone growth, Microsoft may be out of luck as Nokia tries to recover from its blunders .

IDC

With its new Surface line of mobile devices , Microsoft has surprised many who thought that the company would never directly compete with its partners in the PC/tablet arena, or that the company couldn't pull the pieces together like Apple in crafting a product that people might stand in line to buy.

Of course, the line will be short if the price, availability, battery life, apps, and other essential pieces of data don't stand up to the competition. Nonetheless, could a Microsoft phone be far behind the Surface?

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