News

Microsoft: Surface Tablets May Cause OEMs To Abandon Windows

• By Gladys Rama
• July 27, 2012

Microsoft acknowledged on Thursday that its forthcoming Surface tablet could strain relationships with its hardware partners.

A cautionary note buried in Microsoft's 100-page Securities and Exchange Commission filing was highlighted by The New York Times. In the "Risk Factors" section of Microsoft's 10-K form filed with the SEC, Microsoft cited hardware partners' displeasure at having to compete with the Microsoft-produced Surface tablet on top of non-Windows tablet devices as a possible trouble spot -- possibly turning them away from using Windows in their products.

"[O]ur Surface devices will compete with products made by our OEM partners, which may affect their commitment to our platform," Microsoft's 10-K form indicated.

Other challenges Microsoft cited are the relative dearth of Windows apps and the success of vertically integrated competitors like Apple in the consumer product space.

Microsoft unveiled the Surface last month in a surprise event in Los Angeles. Reuters reported that major OEM partners, such as Asus and Acer, were kept in the dark about Surface until the launch event itself, while other partners were informed about Surface just three days prior to the event. In contrast, some media outlets had already surmised beforehand that Microsoft would unveil a tablet, competing with its partners.

Microsoft executives have so far downplayed the potential discord that the Surface could cause among partners. When asked how the Surface would fit in the Windows ecosystem during the opening keynote of the Worldwide Partner Conference earlier this month, Microsoft CEO Steve Ballmer was careful to emphasize the importance of OEMs.

"Surface is just a design point. It will have a distinct place in what's a broad Windows ecosystem. And the importance of the thousands of partners that we have that design and produce Windows computers will not diminish," he said. "We have a mutual goal with our OEM partners to bring a diversity of solutions, Windows PCs, phones, tablets, servers, to market. And what we seek to have is a spectrum of stunning devices, stunning Windows devices."

Surface will run Windows 8 Pro and Windows RT, the version of Windows 8 for ARM devices, bringing it in direct competition with several Microsoft OEMs -- including Lenovo, Asus, Acer, Toshiba, Dell and Hewlett-Packard -- that have already announced their own Windows 8 tablets.

"Surface happens to be one incarnation [of opportunities in Windows 8], but we have tons of others for software developers, hardware developers, systems integrators, training companies, and all of the other partners represented in the room here today," Ballmer said at WPC.

Microsoft has yet to reveal pricing for the Surface, but it has indicated that it will not undercut OEMs on price.

"Suggested retail pricing will be announced closer to availability and is expected to be competitive with a comparable ARM tablet or Intel Ultrabook-class PC," Microsoft announced during the Surface launch event. "OEMs will have cost and feature parity on Windows 8 and Windows RT." In the absence of an official pricing list from Microsoft, rumors of a $599 to $1,000 price tag for Surface have been rampant (although the $1,000 rumor was swiftly debunked).

Surface tablets running Windows RT are expected to become available when Windows 8 launches on Oct. 26. Windows 8 Pro Surface devices are expected to be released 90 days later.