Clearly the powers that be at Microsoft got tired of Apple’s runaway revenues, profits and stock price. They got tired of their domination of the tablet and mobile segment. They got worried about Apple’s creeping enterprise market share and got even more worried about how cool enterprises viewed them at Microsoft’s expense. Something had to be done, yet nothing was being done. Microsoft’s ecosystem lacked inspiration and only Google seemed to care enough to react.
Microsoft’s Surface with Windows 8 Metro
Microsoft’s response is Surface. This is not a reference tablet design for others to derive better products from. This is the best product Microsoft could have possibly made and it is going to sell it itself. Ballmer’s keynote speech carefully tip-toed through that mine-field by positioning Microsoft over the last 30 years as a significant hardware provider. You could sense in Ballmer’s pitch the careful preparation for the shock that was to come; at least from its OEMs that were informed only 3 days before Monday’s announcement. What a massive ‘no confidence’ vote for them!
On the surface (sic) it all looks pretty good. I say that because Surface is not available ‘today’, so I haven’t touched one yet. Despite the fact that Monday’s keynote speech shamelessly borrowed cues from Apple; availability was not one of them – Surface is still several months away from sale. It seems Microsoft had to react now for its long term health – it couldn’t wait for autumn when the Arm version of Surface is scheduled to ship; the ‘pro’ Ivy Bridge version is possibly January 2013. This precipitation shows in the curious lack of technical detail revealed during the announcement. Microsoft didn’t disclose any real chip, RAM, display, or 3G/4G characteristics and I’d be interested to know who is building it too. We know for a fact it is not LG, because the day after this announcement, they threw in the towel on tablets.
The role reversal between these two companies in such a short space of time is nothing short of flabbergasting. A little over two years ago Microsoft’s revenues were greater than Apple’s. Today, Apple’s is twice Microsoft’s.
But that’s not the only reversal.
Apple has overtaken Microsoft (and Google) in all metrics not least of which is operating margin percentage. Remember when investors were focused on “software” and “services” companies because they were more profitable? That a hardware company could be more profitable than either software or services is akin to heresy in the computer industry. This is the main reversal I am talking about. This strength comes from Apple’s deep integration of hardware, software and services – a fact that has escaped Google so far, but perhaps Microsoft with this announcement has finally ‘got it’. Perhaps this is the new trend – a return to vertical integration, just like our return to centralised computing with the Cloud. And I am sure Google is watching very closely with its Motorola division on 24 hour call.
Is Surface going to make a difference? Probably in the enterprise, because it is a more convenient form factor. It will certainly help stop the rot at the desktop, even though I believe Metro is a poor fit for business applications. Will it compete for consumer attention? Probably not. Apple’s consumer content ecosystem is too well embedded. Apple does need to keep its eyes peeled on that deep Skype integration with Windows Phone 8 however. That could dent iPhone sales. Will Surface upset Microsoft’s OEM customers? Yes. It will be interesting to see how some calls of ‘betrayal’ transform into actions – so far the silence has been deafening, even though I am sure Apple’s legal team are also taking a very close look.
Microsoft Surface Table Prototype
So at last, after many failed attempts, it looks like there is competition in the tablet space. And that can only improve life for users. On this form, can we expect a Microsoft Television? A coffee table is more likely.
And to think that Ken Olsen founder of Digital Equipment Corp. once famously said: “There is no reason for any individual to have a computer in his home.” No more than a TV or a coffee table.
The Fourth Column 
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