Bromancing the tablet
A last-minute invitation giving journalists and analysts just four days’ warning; a United States West Coast unveiling of “a major product” touted as “something you will not want to miss”; a presentation of an own-brand device by the company’s chief executive touting its design aesthetic; and sintered magnesium parts in exploded view.
You could easily have mistaken this week’s unveiling of Microsoft’s Surface tablet range for an Apple event – although you would never mistake Microsoft’s bombastic Steve Ballmer for a charismatic Apple executive.
Yes, Microsoft is getting into the iPad space. After sitting on the sidelines for years, it has now started running after the fastest-growing sector of the computing market with its Surface.
The fascinating thing about the announcement, though, was how dramatically it shows the Applefication of Microsoft. The company that brought the world Windows and got rich on it has for years had serious Apple envy.
When Bill Gates was still working full-time at the company, he would fume during visits to London at Apple’s Regent Street store, opened in late 2004. “We need to have those,” he would say, to the despair of his minions, who would forbear from pointing out that Microsoft did not really make things like Apple did; it made software.
A good arrangement
Apart from the Xbox, a Microsoft store at that time would have been a showcase of lots of boxes of software and a few mice and keyboards. The laptops and desktops on which Windows ran were all made by other companies, such as Dell or HP.
And that was a good arrangement for Microsoft: software is wonderfully profitable, because once you have made one copy, the next billion or so cost nothing to duplicate. It made Microsoft the most valuable company in the world by the end of 1999.
But now Microsoft is not just snubbing those companies that made it rich by making PCs that ran Windows – it is positively apeing Apple, making something the same size as an iPad, putting its own name to it, deciding the price and selling it through its own stores, both physical and online. (Gates will be happy.)
But is this just some bizarre financial bromance, or something deeper?
“Why would Microsoft hedge against what it has – the most brilliant business model of the 20th century?” said Horace Dediu, a former Nokia executive who now runs the Asymco consultancy. “Because,” he answered, “it does not work anymore.”
Rise of mobility
He says this is because of the rise of mobility – increasingly, we use smartphones and tablets to work anywhere and any time, whereas just 10 years ago we would have had to sit in front of a desktop or unfold a laptop.
Now iPads are used to create art or hold flight manuals for pilots; meanwhile, nearly a million Google Android smartphones are being activated every day.
Mobility is big. Smartphones have been outselling PCs since late 2010 and, although the tablet business is only two years old, a total of 108-million are expected to ship this year, against about 400-million PCs. IDC has consistently lowered its forecast for future PC sales and keeps pushing it up for tablets. “The rate of growth in these platforms is almost vertical,” said Dediu. “Microsoft’s for Windows is pretty much flat.”
Google is following the same path: it has bought Motorola Mobility, the US smartphone and tablet-maker, and later this month is expected to announce an own-brand 7-inch tablet. (Larry Page et al will not be pleased with Microsoft for stealing their thunder; Ballmer, who hates Google, will be delighted, which might also explain the last-minute nature of the announcement.)
The Applefication of Microsoft is happening because the company has no choice. The smartphone and tablet pose what Benedict Evans, an analyst at Enders Analysis, on Tuesday called “an existential threat” to Microsoft: if it cannot get a credible foothold there, its growth just stops. So far it has not managed it in smartphones and tablets suddenly look like a necessary product.
Signs of strain
Of course, this adventure could go horribly wrong. Think of the Zune – a Ballmer-ordered product (he literally snapped his fingers in a top-level meeting and said: “We need one of those!”) that came far too late in 2006 to compete with the iPod, which had already passed its glory days. Apple already had its eyes on the iPhone, which has supplanted and far exceeded it for profitability. Zune never went anywhere (literally, it was never sold outside North America) and was quietly killed last year.
Then again, the Xbox 360 games console has done well, cementing the company’s position in millions of living rooms around the world. Except when you look at the numbers: total sales are put at 67.2-million since 2005. Next year is expected to see a new generation – the Xbox 720 – for which a leaked internal document forecasts 100-million sales in 10 years. Dediu said: “A hundred million? That is equivalent to 100 days of Android activations. And that is their ambition for 10 years?”
Nobody is expecting that Microsoft is going to stop Dell or HP selling Windows computers – or that they are going to stop doing so immediately. But the signs of strain are already there.
Last summer, HP said it would quit the PC business because the margins are razor-thin (it dumped its chief executive and recanted); Dell keeps trying to push into services and makes nothing on consumer PC sales.
But in making the first big move into the Windows tablet market Microsoft has shown that it realises the need for reinvention. The old Microsoft would have let a thousand PC-makers build tablets – big, small, great, awful, pricey, cheap. The new one will control the apps that run on the Surface, through an online store, and will decide the price and the models. It is a long time since 2004 when an ebullient Ballmer came to London and told an audience of journalists then prodding him about the iPod: “With great respect to Apple, there is no way anything gets to critical mass with Apple because Apple just does not have the volumes.”
Even then the iPod was outselling Microsoft’s then-cellular offering, Windows Mobile. If you cannot beat them, join them and, ideally, steal their clothes too. – © Guardian News & Media 2012