Is Microsoft's Surface Still a "Strategic Mistake"?

“Microsoft is saying ‘Here’s a tablet but you can’t buy it because we aren’t shipping it, we don’t know what the price will be and we don’t know when it’ll ship. We normally work with Intel but we’re not sure that will work so we’re making another version with ARM and we’ve got one operating system but that might not work so there will be another one’…” He had even harsher comments, such as:

“…the company (Microsoft) is “increasingly being viewed as irrelevant to the future of software”

In August, JT Wang, chairman and chief executive of Acer, assailed Microsoft’s plans to directly compete with Acer’s Iconia or Lenovo’s IdeaPad tablets. He complained that this would be “negative for the worldwide ecosystem” in computing. Now that the Surface has been launched with great fanfare, what should we think of the naysayers like Saylor? Is the Surface a role model for OEMs or discouragement from entering the market? The views of the OEMs are important and there are few as important as Michael Dell. In a recent interview, he said of the expected sales of the Surface:

“I think there’s been some understanding of the number of units that are likely — although it’s a relatively small percentage, maybe in the 1% to 2% range of the total PC units through the middle of next year, certainly with our business being more focused on commercial, centered around the Windows 7 transition, which is still very much under way, I’m feeling very good about the portfolio we have with OptiPlex, Latitude, Precision. The XPS product line is in good shape, and we’re ready for Windows 8.”

HP, Lenovo, and Samsung also applauded Microsoft’s decision to create its own Tablet PC declaring that their relationships with Microsoft haven’t changed. They likely understand that what’s done is done and it is preferable to put the best face on what has been rumored strong sales, great reviews of the Surface, and the likely threat to OEM products. In a recent interview with the Wall Street Journal, Steve Ballmer revealed little about Surface sales, answering a question about Surface sales by saying:

Numerically there’s not really much that’s interesting to report. If you were to call the retailers, they would say, ‘Hey, off to a very good start.’ We’re out of stock a lot of places on touch [screen] machines.

The Surface reminds me of Windows 3.0, which was an accidental success, replacing OS/2 in Microsoft’s desktop plans after sales exploded. Could the same thing happen with the Surface? Clearly, Microsoft has seen the margins enjoyed by Apple, who offer both hardware and software and these are attractive. Also attractive is the ability to set the standard for OEMs, some of whose products Redmond has been disappointed with in the past. Will a smartphone follow or is Microsoft content to let Nokia, Samsung and HTC represent it in the market? Stay tuned on this, but my bet is that Microsoft’s engineers are chomping at the bit to produce a Microsoft smartphone. What are your thoughts on the Microsoft Surface?]]>