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Microsoft’s big Windows 8 RT tablet balancing act

by David Needle

June 15 2012

If, as expected, Microsoft reveals its own branded Windows 8 tablet on Monday, it could strengthen the market for these new devices or alienate the very hardware partners the software giant needs to take on the iPad.

Rumors of Microsoft’s plan to make a Windows 8 tablet spread quickly starting last night after the Hollywood site The Wrap first reported the news. Microsoft has yet to officially confirm that’s what it plans to announce at Monday’s afternoon event in Los Angeles, though a spokesperson did tell TabTimes that it will be a “a major Microsoft event.”

But if it is, as expected, a Windows 8 RT tablet based on the ARM chip design, analysts say Microsoft will have a lot of explaining to do. 

“Depending on what Microsoft announces, what they do can disrupt the business of their partners,” says DisplaySearch analyst Richard Shim. “If they come out with something that resonates highly with buyers, that’s a hit, will they hand that over to others to make money? I don’t know of any companies that do that.” 

Shim and others believe their could be a number of reasons for Microsoft’s move. Right now, Apple’s iPad dominates the market and the first Windows 8 tablets aren’t due out till later this fall, probably no sooner than late October or November. 

“If Microsoft is positioning this as a way to show solidarity with its partners and display its level of commitment to the Windows 8 platform that’s a very smart thing for them to do,” says Charles King, principal analyst with Pund-IT.  “If I’m more of a cynic, I say Microsoft is doing this because they’re seeing a less enthusiastic interest in Windows 8 tablets from hardware partners than they had hoped.” 

Why Microsoft’s partners might like the idea

The devil with all of this is in the details. Just what Microsoft will price its tablet at probably won’t be revealed at Monday’s event, but details of its distribution strategy might be, and NPD Group analyst Stephen Baker thinks that’s a crucial aspect of the rollout. 

Baker says Microsoft could be planning to use its tablet as a kind of canary in the coal mine to alert its hardware partners what to expect next. 

“This could be a classic case of why anyone that’s is a brand sells direct to consumers,” says Baker. “The reason is that they don’t feel they’re getting enough connection to the end consumer by going through partners. Selling their own product gives them some ability to test the product with the consumer and get some feeling as to what works and doesn’t work.” 

Baker says one thing Microsoft could do to allay its partner’s fear of competing with their main supplier, is to limit distribution. Microsoft might, for example, only offer its tablet online and through its network of several dozen Microsoft retail stores. 

And even though Microsoft could undercut its partners on price, Baker doesn’t think that will be an issue. 

“If they limit the distribution, I don’t think competing is a slap in the face to their partners,” says Baker. “They own the ecosystem so they can sell these things at a lower price. In the Microsoft stores they can see the impact of what’s working and share that with their partners. The RT tablets aren’t going to sell to IT so that’s not an issue for the Microsoft partners selling tablet to the enteprise."

Hooray for Hollywood? 

But another analyst, Jack Gold, disagrees. “If Microsoft brings out a tablet that undercuts its partners on price, they’re going to create all kinds of bad feelings in the ecosystem,” said Gold, head of J.Gold Associates. “I can’t think of anything that would tick off the Acers and Lenovos than having to pay money (licensing fees) to Microsoft which then turns around and competes with them.” 

Gold had another few interesting bits of speculation. Microsoft usually holds its big media events in New York or San Francisco. The fact that this one is in Los Angeles could mean Microsoft has a big media partnership to announce or even an acquisition. 

“Microsoft could be planning a more specialized consumption device that competes with the Amazon Kindle Fire,” says Gold. “If its primary purpose is for media consumption and Microsoft expects to get a lot of revenue from that either directly or via a partnership, it could really low-ball the price of the device.” 

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