Microsoft and Google: In the Same Boat at Last

One of the ways that Microsoft (Nasdaq: MSFT  ) was demonstrably taking pages out of Apple's (Nasdaq: AAPL  ) playbook when it unveiled its Surface tablet this week was embracing a massive shroud of secrecy. No one knew quite what to expect heading into the event, with hype and speculation expectedly ensuing.

Not-so-full disclosure
There's a group of particularly interested parties that were also kept in the dark: the software giant's wide stable of third-party hardware partners. There are conflicting reports about who knew what when, but ultimately Microsoft's foray into its own branded hardware pretty much said: "By the way, fellas, we've decided to compete directly with you."

According to Reuters, Windows head Steven Sinofsky called up a handful of partners on Friday, letting some in on the "barest details" without disclosing what the device would be called or other pertinent specs. CEO Steve Ballmer said the company had told its largest hardware buddies about the tablet but didn't give up much more information beyond that vague statement.

I guess that puts Acer and Asustek lower on the totem pole, since they didn't find out until Monday, like the rest of us mere mortals. An anonymous Acer exec said: "No senior executives heard about the news last week. We're quite surprised." That differs from what an Asus spokesman told Bloomberg, saying, "Our management did learn about that in a later stage."

Hewlett-Packard (NYSE: HPQ  ) and Dell (Nasdaq: DELL  ) , the two largest domestic PC makers, wouldn't say whether they were given a heads-up ahead of time, with a Dell rep providing a stock response: "We remain committed partners to Microsoft. We remain committed to Windows 8, and we will have a Slate product at the time of launch." Lenovo echoes this sentiment nearly identically, "Microsoft has been and will continue to be one of Lenovo's most valued partners."

After the horrendous TouchPad debacle of 2011, HP should be jumping back into the tablet market with Windows 8 later this year as well.

If you want something done right, do it yourself
Microsoft's big jump into hardware is akin to saying it doesn't believe its hardware partners can get the job done properly. The software giant has been particularly picky with who it's including in the ground floor of other Windows 8 tablets that will be launched later this year, and HTC supposedly didn't make the cut.

Meanwhile, Apple is riding its integrated approach to riches and may very well become the most profitable public company ever this year. Cupertino has long focused on building a complete package of hardware, software, and services, a very different strategy from its software-centric rival.

What ever happened to free will?
The hard part for hardware players is that they have little choice at this point. As much as it must pain their egos to see their largest software partner become a competitor, they're helpless without the operating systems that power their devices. It's not as if they can call up Apple and look to license Mac OS X. This ain't the '90s anymore.

Tech historians will remember the brief time when Apple actually did license its Mac OS, creating Mac clones, for three years in the mid-'90s. One of Steve Jobs' first moves upon his return in 1997 was to promptly kill the program, in part by releasing a new operating system, Mac OS 8, which clone makers didn't have the licensing rights to. The rest, as they say, is history.

Beyond Windows and Mac OS X, the OS pickings are scant. Google's (Nasdaq: GOOG  ) Chrome OS and open-source Linux remain minuscule slivers in the big picture, so OEMs have no alternatives other than to begrudgingly play ball.

Big G can empathize
This is the exact dilemma that Google finds itself staring at with its recently closed acquisition of Motorola. As Android's popularity continues to skyrocket and now sits on more than half of all smartphones sold in the world, Google finds itself the owner of a hardware business (and a bunch of patents).

The Nexus Tablet that will probably be unveiled this month is supposedly made by Asus, but an integrated Googorola smartphone doesn't seem so far-fetched at this point. The more aggressive that Google gets with pricing to challenge Apple, the more hostile its own hardware partners will become, because they don't have software and services offerings to boost margins after the initial sale.

"I am you and what I see is me"
Despite intensifying competition in numerous arenas, including search, Internet browsers, desktop operating systems, mobile operating systems, productivity software, and countless others, Google and Microsoft now find themselves arm-in-arm in the same boat trying to balance aspirations of integrated devices with long-standing relationships with hardware partners that have made them what they are today.

That's a boat I don't want to be in.

Apple's focus on integration has led it to become the largest tech company in the world, so can you still buy Apple today? That's the trillion-dollar question on the minds of every current and prospective Apple shareholder today, and fortunately we have the answer as part of our exclusive Apple research service. Meanwhile, there's a new industrial revolution in manufacturing that promises to change how virtually all products are made. Learn more about it with this special free video report.

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 Microsoft, Apple, and Google. Motley Fool newsletter services have recommended buying shares of Microsoft, Google, and Apple. 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.


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