With Surface, Microsoft takes a page from Apple

Posted at 06/20/2012 9:27 AM | Updated as of 06/20/2012 7:37 PM

WASHINGTON - With its new tablet computer, Microsoft is taking a page from Apple's playbook in an effort to control both hardware and software for computers, in a strategy which carries some risk, analysts say.

With the tech landscape rapidly shifting, Microsoft is being forced to shift to the "vertical" strategy employed by Apple and Google, aiming to keep in touch with users with hardware, search functions and software.

"Apple created this new environment with these new products and cloud services. All Microsoft has to do is offer the same thing under their brand name," said independent analyst Jeff Kagan.

"Microsoft will have to refresh their brand. Right now the Microsoft brand is like dear old grandpa. It needs to be invigorated."

The new landscape will see these three big players, Microsoft, Google and Apple, competing more directly on each other's territory, analysts say. Other smaller players include Amazon, which has its own hardware devices, and BlackBerry maker Research in Motion.

Google is widely expected to launch its own branded tablet as well and a phone that may carry its own brand or that of its new acquisition, Motorola Mobility.

"It's about controlling the user experience, which is segmented and fragmented," said analyst Ramon Llamas at IDC.

"It really helps to have a presence on all the screens," including mobile phones, PCs, TVs and tablets, he said.

To carry out the strategy, Llamas said Microsoft also needs to beef up its applications available. He said it now has some 100,000 for Windows mobile phones, many of which could be adapted for tablets, trailing Android and Apple.

But it's not clear if Microsoft, even with its market muscle, can generate the same kinds of apps that drive the experience for tablet users.

"If you're an app developer, you are already programming for Apple and for Android and you want to know what the market is in Windows, what is the revenue opportunity," he said.

"Without apps, you will have a piece of glass and metal that surfs the Web and not much else."

Jack Gold of J. Gold Associates said Microsoft is trying to defend its Windows brand -- the operating system used on most personal computers -- with the strategy, but also runs the risk of alienating the PC makers which provide most of the revenue to the software giant.

"If they're not careful they could turn off some of those (PC makers) and force them into something else, like Android."

Android is the operating system used on mobile devices from Google, which is likewise developing a strategy that includes gadgets as well as software and search to keep its users in the "ecosystem."

Gold said Microsoft needs to look forward but not too far ahead.

"I don't believe the PC model is going away any time soon, but it is changing and morphing," he said.

If Microsoft tries to grab too much control of hardware, it risks alienating the big PC makers like Dell, Hewlett-Packard and Lenovo.

Even though Apple has succeeded in this "walled garden" approach, it might not work for Microsoft.

"If you try to limit innovation to a single company, ultimately you're undercutting the ability of the market to innovate," Gold said.

Gold said Microsoft acted on tablets because "the tablet market in Windows is close to zero."

"They are trying to kick-start the high end of the market, and if they limit it to that they would be OK." he said.

"But if they start competing with Acers and Lenovos it's going to be a problem. It could push them into the Android camp."

Gartner analyst Michael Gartenberg said the move by Microsoft "shows just how concerned they are about Apple and the threat Apple is to their ecosystem right now."

But he added that Microsoft may not be able to duplicate the success of Apple: "The only company that has been good at being Apple is Apple."

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