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Microsoft Announces a Small, 7-Inch Tablet ... and it's Not a Surface Mini

When Microsoft  (NASDAQ: MSFT  ) launched the Surface in October 2013 the move was essentially a slap in the face to its OEM partners.The tablet was not only a competitor to Apple's  (NASDAQ: AAPL  )  iPads and machines running Google's  (NASDAQ: GOOG  )  Android OS, it also competed with tablets and laptops running Windows.

Though the Surface has only won limited market share, it can be argued that every one sold takes a potential sale away from the companies Microsoft relies on to manufacture the bulk of the products running Windows. Anger those partners and maybe they decide that Android or Google's Chrome OS -- which are both open source and free to use -- make more sense as operating systems for some or even all of their machines.

Mass defections from Microsoft's OEM partners did not occur after the Surface launch, though Dell, Lenovo  (NASDAQOTH: LNVGF  ) , Samsung (NASDAQOTH: SSNLF  ) , and Asus all launched -- then quickly abandoned -- tablets running Windows RT, the slimmed-down version of the OS that powers the original Surface. HTC  (NASDAQOTH: HTCXF  )  didn't even get that far -- it canceled plans for a large-screen tablet running RT before reaching the launch stage.

No companies dropped Microsoft overall, but the Surface launch made it clear that if the Windows-maker entered a category it might deter its partners from doing so. As such, it always seemed odd when rumors of a Surface Mini began to appear on various technology websites. If Microsoft wants to compete at the bottom of the market in smaller devices where price matters, discouraging its partners from creating lower-end tablets seems like a bad idea.

Microsoft looks to have taken that message to heart. There's no sign of a Surface Mini, and the company just announced the first 7-inch Windows 8.1 tablet. Instead of being a Microsoft-branded device, the tablet is a Toshiba  (NASDAQOTH: TOSBF  ) product. That does not mean however that the Microsofties did not play a hand in its development.

"It turns out the company has been working directly with Toshiba, and hand-in-hand with Intel, on a different device that will give Windows users a new option in the market for small tablets," GeekWire reported. 

What is the new device?

Introduced at Computex in Taiwan, the new tablet is called the Toshiba Encore 7. In a post that transcribed his keynote at Computex, Microsoft Vice President Nick Parker explained that the tablet is "being co-developed by Microsoft and Toshiba and in close collaboration with Intel, Goodix, and AMI." The tablet won't be a Surface Mini. It likely will be an answer to the many sub-$200 7-inch tablets running Android or Android variants, including Amazon's Kindle Fire.

This is a new Microsoft

Under former CEO Steve Ballmer, Microsoft operated as if it still held a virtual OS monopoly. Back before Android and Chrome were options, any company that wanted to sell computers had to use Windows as its operating system. That allowed Microsoft the freedom to do pretty much whatever it wanted.

New CEO Satya Nadella has a lighter touch and he seems to understand that the world has changed. It seems unlikely that Nadella would make a move that provokes the company's partners, even if he could do so without consequences. By working with its partners instead of against them Microsoft is also giving itself more chances to succeed. There are dozens of 7-inch Android tablets in the marketplace with some even costing less than $100.

The Toshiba Encore 7 might be the answer to those devices ... but it might not be. Partnering with many companies should allow Microsoft to have a broad portfolio of smaller tablets running Windows 8.1, including low-end devices to battle with Android and nicer ones to challenge the iPad Mini.

That could be very important going forward as International Data Corporation reported that 55% of the tablet market in 2013 was for devices with screens under 8 inches. 

Setting the right tone

Whether Microsoft can crack the 7-inch tablet market or not remains to be seen. It seems likely that some PC users will want to stay in the Windows 8.1 ecosystem and not have to use an Android or iOS tablet. The real boom for devices like the Toshiba Encore 7 may be in developing markets where demand for tablets has not yet peaked and Microsoft has made inroads with its Windows 8 phones. 

In many ways though the success or failure of Windows 8.1 in the small tablet market is less important than the company showing it can learn from its mistakes. The Surface launch was arrogant and it showed a business that had not adjusted to changing market conditions. The announcement of the Toshiba product shows a company that's embracing those changes.

Not trying to dictate terms will serve Microsoft well going forward and give it the best chance to win back market share lost to Android and iOS. 

Leaked: Apple's next smart device (warning, it may shock you)

Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!

Read/Post Comments (4) | Recommend This Article (3)

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 06, 2014, at 4:07 PM, 123spot wrote:

    Daniel, are you sure your disclaimer has it right about which class Google shares TMF recs and owns?..Spot

  • Report this Comment On June 06, 2014, at 7:34 PM, TMFDankline wrote:

    The discliamer auto-generates. I don't touch that part.

  • Report this Comment On June 07, 2014, at 9:46 AM, windowsuser1 wrote:

    Microsoft needs new aggressive thinking; hopefully the new CEO will bring it. Microsoft is currently depicted as the 98 lb. weakling in the battle with Goliaths Apple and Google. But when you look at the advantages Microsoft still possesses and can leverage - a huge existing base of Windows and Office users, all kinds of technology alliances (e.g. Intel) - not to mention the financial wherewithal to pursue any choices it makes, the potential exists to really kick butt in this market yet. Admittedly, aggressive thinking, alone is not enough, you also need a touch of Jobsonian creativity.

  • Report this Comment On June 07, 2014, at 2:12 PM, symbolset wrote:

    It is really amazing how much money companies are willing to burn on the pyre of Windows tablets, rather than make the Android tablets people actually want. Clinging to the past and denying the reality of the market is not how to maximize returns for shareholders. It is one thing to head the wrong way early, but at this point the evidence is in. This is not the path to profit.

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Daniel B. Kline

Daniel B. Kline is an accomplished writer and editor who has worked for the Microsoft's Finance app and The Boston Globe, where he wrote for the paper and ran the business desk. His latest book "Worst Ideas Ever" (Skyhorse) can be purchased at bookstores everywhere.

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