After 40 Years, Microsoft Wants to Be the Next Apple

The rumors were true!

Heading into Microsoft's (Nasdaq: MSFT  ) super-secretive tablet-centric event, people weren't sure exactly what to expect other than, well, a tablet. The rumblings that Barnes & Noble could have played a partnered role were shot down just hours ahead of the event by B&N itself. Instead, the speculation that Microsoft was tossing its hat directly into the hardware ring with its own tablet was spot-on. Say hello to Microsoft Surface.

Microsoft Surface. Source: Microsoft.

Microsoft: the next Apple?
The most important part of yesterday's announcements is that Surface represents one of the biggest strategic shifts for Microsoft since its inception nearly 40 years ago in 1975.

Throughout its history, the software giant has focused on just that: software. Its forays into hardware have been limited in scope and mostly in smaller markets, primarily the Zune music player and Xbox 360. The entertainment and devices division that houses the Xbox business generated revenue of $1.6 billion last quarter, less than 10% of sales, swinging to an operating loss.

The Zune has since been officially killed, and beyond that, Microsoft's hardware products in its core PC market are minor accessories like keyboards and mice. Within the PC and smartphone markets, the company has always only served up the operating system, leaving the hardware to third-party OEMs.

Never before has Microsoft made such a big plunge into hardware in what it hopes will become a core market, integrating its hardware, software, and services all into one streamlined package not unlike its rival from Cupertino. Of course, this is the strategy that Apple (Nasdaq: AAPL  ) has pursued since day one.

Microsoft Surface (left) vs. Apple iPad (right). Sources: Microsoft, Apple.

The open strategy helped the software giant become ubiquitous during the rise of the PC decades ago, yet the open strategy has mostly failed Google's (Nasdaq: GOOG  ) attempts to gain traction in the nascent tablet arena -- a failure that Microsoft (as well as Google) has taken note of.

Fill in the blank
Microsoft left out some of the juicier details, so one can't help wondering whether the company took the wraps off the device a little prematurely and whether it's fully baked yet. It's launching two versions of the device, Windows RT with ARM Holdings-based chips and Windows 8 Pro with the requisite Intel (Nasdaq: INTC  ) Inside. Here are some of the specs the company has detailed, compared with the third-generation iPad.

Specification

Surface

Surface

iPad (Wi-Fi Only)

OS Windows RT Windows 8 Pro iOS
Weight 676 grams 903 grams 652 grams
Depth 9.3 mm 13.5 mm 9.4 mm
Display 10.6-inch ClearType HD 10.6-inch ClearType HD 9.7-inch Retina display
Screen resolution Unknown Unknown 2048 x 1536
Battery 31.5 watt-hour 42 watt-hour 42.5 watt-hour
Storage 32 GB / 64 GB 64 GB / 128 GB 16 GB / 32 GB / 64 GB
Price Unknown Unknown $499 / $599 / $699

Sources: Microsoft, Apple.

The Windows RT tablet shown off is sporting a Tegra processor from NVIDIA (Nasdaq: NVDA  ) , although Microsoft declined to specify whether it was the older dual-core Tegra 2 or the latest quad-core Tegra 3. It's presumably the latter, since we already know that NVIDIA is going to be a Windows 8 launch partner with its Tegra 3, so it wouldn't make sense to stick an old chip in the new Surface.

One important missing piece is the price, but the company says pricing should be comparable with other ARM tablets or Ultrabooks. That's going to be a key aspect as Apple maintains its pricing aggression, and a pricing advantage could give Microsoft some hope in scoring sales.

Out with the old Surface, in with the new Surface
We're no longer talking about the coffee table-sized touchscreen that the software giant has had lying around its labs for years with little to no commercial market. That offering has been rebranded as PixelSense, and the Surface name is being repurposed for Microsoft's new tablet.

Apple envy
The announcements were very Apple-esque in more ways than one. The event was shrouded in secrecy heading into the unveiling, and the presentation itself reminded some analysts of Apple's. Microsoft is also releasing an accessory very similar to Apple's Smart Cover called a Touch Cover that features a built-in tactile keyboard. One analyst even called the Surface "the sincerest form of flattery to Apple."

Microsoft Surface. Source: Microsoft.

The real question is whether Microsoft find tablet success by taking a page out of Apple's integration playbook. Let's be clear about something: Surface is no iPad-killer. But it might very well be an Android tablet killer.

I've been bullish on Windows 8 from the get-go ever since the software giant unveiled the OS late last year. Microsoft Surface will probably see some success, and the next major strategic dilemma will be whether the software giant decides to expand its integration and jump into more hardware if Surface does particularly well.

Maybe, just maybe, Apple is on to something with the whole integration approach.

Apple's success with integration has made it the biggest tech company in the world, so does that mean you should buy or sell Apple today? We've laid it all out for you in a brand new report that has the answer to that $500 billion question. Or to learn about another tech revolution, you can check out our research report detailing another technology revolution you might not even know about.

Fool contributor Evan Niu owns shares of Apple, but he holds no other position in any company mentioned. Check out his holdings and a short bio. The Motley Fool owns shares of Intel, Microsoft, Apple, and Google. Motley Fool newsletter services have recommended buying shares of Apple, Microsoft, Intel, Google, and NVIDIA,  writing puts on Barnes & Noble and NVIDIA, and creating bull call spread positions in Apple and Microsoft. The Motley Fool has a disclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


Read/Post Comments (17) | Recommend This Article (25)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 19, 2012, at 11:16 PM, fatmonk wrote:

    I thought it is an UltraBook light.

  • Report this Comment On June 19, 2012, at 11:26 PM, Bolarmd wrote:

    I am not sure about the surface from windows. Its not a IPad killer. No way. Reasons intergration and problem with keyboard attached to the cover. Practically hard to use.

  • Report this Comment On June 20, 2012, at 12:09 AM, macgregor54 wrote:

    Niche tablet, I think. I actually HAVE a KB for my iPad, and don't use it. The iPad is a Swiss Army knife device. The KB is irrelevant. ALL of its functions involve tradeoffs, and right now, I post this on a PC, as I prefer to sit upright, use a KB to compose, organize my data with folders and drives, do multimedia engineering with tools I am familiar with, hook crap up to my stationary and customary office, find my 1980's code and engineering, and have 19" of display. Apple did not change that. It added mobility to a subset of it. It gave me continuity as I move about. MS also did not change that. It filled in some holes in its business model. This intro seems additive to the computing world, and may be useful. I don't think it will sink Apple's boat, nor float MS' boat. It's not revolutionary now. Apple did that part and reaps the immediate rewards. MS will get some mileage from this Surface thing. Good for them if they are really innovating. Good for all of us.

  • Report this Comment On June 20, 2012, at 12:44 AM, tychicum wrote:

    Zune, Kin ... Surface. Sigh ...

  • Report this Comment On June 20, 2012, at 1:44 AM, fatmonk wrote:

    @ macfregor, i agree.

    the question will come down to price, battery life and when. MS is just trying too much.

  • Report this Comment On June 20, 2012, at 2:27 PM, JimmyZangwow wrote:

    fatmonk is right. I found this out in real estate - the ONLY thing that matters when the decision to buy is made - is price. The best thing about the Surface is that there *may* finally be a true alternative to Apple and Android when thinking about tablets.

    There is no way that this could harm the iPad. Even if Surface turned out to really be superior on tactile and experiential levels, Apple will always have a legion of unskeptical buyers.

  • Report this Comment On June 20, 2012, at 2:34 PM, miteycasey wrote:

    Most people would say Microsoft isn't trying enough.

    What was the last thing they innovated?

  • Report this Comment On June 20, 2012, at 2:43 PM, stealthology wrote:

    People can do serious work on the Surface, that's a huge difference. Pro will have a file system/desktop, a powerful CPU to run any windows program, etc. When you're not using it as a work machine, just switch back to tablet mode.

    I think this will be pretty damn popular in the corporate world. The ability to use MS Office is real nice as well.

    Let's be honest, tons of people will adopt Windows 8 as their desktop/laptop OS after it launches. They'll be familiar with the interface, and naturally will be more comfortable using the tablet & mobile W8 platforms, since they are basically the same.

  • Report this Comment On June 20, 2012, at 3:33 PM, WHOVPLLC wrote:

    Microsoft has a reasonable chance of success with tablesn but has Issues: 1. Way, way late to the game. 2. The new MSFT Tablet MUST have a reasonable name at intriduction. Some name like Zuni(R) is just that lunely. - A "Balmer" for Steve Balmer might be acceptable since Steve can actually put his mark on this Tablet entry. A Bill and a MeLinda would also work for Bill & MeLinda Gates. A Gateway(R) would have worked; but is now part of another company and is actually in Commercial use. -still. If I do not use my iMac or other Apple product I do use my Gateway or Lenova PC.

    Kahuna, CFA

    Venture Capital

    General Partner

    2012 - 2019

    Kailua-Kona 96745

  • Report this Comment On June 20, 2012, at 3:52 PM, PedalHard41 wrote:

    Love it... the giant, goliath MS is now the copy cat... Get real, MS is bloated like GM. In the next 40 years, they will never come close to Apple or Google. They think a smartphone os is WinMoblie based, think again boys of Redmond. You lost...

  • Report this Comment On June 20, 2012, at 7:23 PM, ftsmd wrote:

    MS has always been the copycat or stealingcat of Apple's ingenuity. Steve Jobs came up with the ideas that MS developed early on.

  • Report this Comment On June 20, 2012, at 7:37 PM, DBLBLU wrote:

    There is already talk out in the blogosphere that most enterprises will skip Windows 8 much the same way they skipped Vista. Windows 8 will be a factor only in the SOHO and retail markets.

    And given that companies are struggling with BYOD policies right now, I can't see them trying to support iPhones and iPads and PlayBooks and Surface.

    Unless Microsoft is giving them away, Surface will quickly become "sub-Surface" and join its brethren Zune and Kin.

  • Report this Comment On June 20, 2012, at 7:41 PM, mlaser59 wrote:

    The concept from MSFT is to integrate your smartphone, tablet and NB with one OS. Transferring data and compatibility, the niche is the business user. How convenient to be carrying ppt with the tablet during my travel instead of a laptop.

    The catch is the ARM processor lacking full functional capabilities with power efficiencies versus the added weight and power inefficiencies yet capabilities of the Intel core.

    I like the concept depending upon price and technical features and would change my computing hardware.

    AMD APU's would work here.

  • Report this Comment On June 20, 2012, at 10:07 PM, crca99 wrote:

    IMHO, if Windows 8 is good, then tablet with Office, keyboard, and real work capability may be rapidly adopted in business world. For example, those specs are an easier sell to our budget tight IT department. Convenient and no one needs retraining.

  • Report this Comment On June 21, 2012, at 5:03 PM, Yahalom wrote:

    Problems with the name. Pity, looks like a good product. The name is always part of the buzz, part of the word of mouth hype, the day-to day use. "I'll Skype you", "I'll Google that" etc.

    Can't see anyone saying "I watched that last night on my Surface", or "Open Skype so I can see you on my Surface"......

  • Report this Comment On June 26, 2012, at 11:42 PM, WHOVPLLC wrote:

    Microsoft has often been on the trailing edge of appliocations technology. <i>MS Word</i>(R) used to be a not very good wordprocessing application until after MSFT copied most of the important features of <i>WordPerfect</i>. After Gates/Balmer of MSFT did that, then except for the Federal Government which would NOT use Microsoft products during the Microsoft anti-trust litigation. That litigation accom[plished little if anything except: 1. Squandered tax-payer's money, and 2. Lead to the DEATH of <i>Netscape</i>(R).

    On the key antitrust issues Microsoft won in the United States. Lost many points in the European Union, however.

    WHOVPLLC

  • Report this Comment On July 07, 2012, at 4:35 AM, thidmark wrote:

    "Problems with the name. Pity, looks like a good product. The name is always part of the buzz, part of the word of mouth hype, the day-to day use. "I'll Skype you", "I'll Google that" etc.

    Can't see anyone saying "I watched that last night on my Surface", or "Open Skype so I can see you on my Surface"......"

    The iPad was widely ridiculed for sounding like a feminine hygiene product.

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