Why Microsoft's Surface is a big strategy shift

The tech giant jumps into the hardware space and heats up the tablet competition.

By MSN Money Partner Jun 19, 2012 11:34AM

By Ansuya Harjani


Microsoft's (MSFT) launch of its first-ever computer, in the form of a tablet called Surface, marks a major shift by the tech giant into the hardware space, as it seeks to replicate the success enjoyed by rival Apple, technology analysts tell CNBC. (Microsoft owns and publishes TechBiz, an MSN Money site.)


"Microsoft's Surface is a premium class of device, which has integrated software, hardware and services," Rob Enderle, principal analyst at Enderle Group told CNBC on Tuesday. "It is positioned directly against Apple. This is Microsoft trying to do a better job than Apple at all three."


Unlike Apple (AAPL), the software giant has relied in the past three decades on computer manufacturers to produce and market machines running its Windows franchise, which it's been struggling to re-invent. Apple, on the other hand, has adopted an integrated hardware-and-software approach, using its own operating system to power devices like the iPad and iPhone -- a strategy that's proven to be a big success.


Enderle says the specifications of the new tablet -- particularly the optical display -- indicate that Microsoft is now ramping up its focus on hardware.  "The Surface's optical display is the first to come into the market. You can play games on the device that you can't on the iPad," he said.


Some other features of the tablet include a 10.6 inch screen, a built-in stand, keyboard, plus front and rear cameras.


But according to Andrew Milroy, Vice President, ICT Research, Asia-Pacific at Frost & Sullivan, Microsoft may be a "little late" in the game. Windows has a negligble presence in the tablet operating system space, compared to Apple's iOS and Google's (GOOG) Android, which have 63 and 35 percent market share respectively.


He also raised concerns about the Surface potentially straining Microsoft's relations with companies like Dell (DELL), Lenovo and Hewlett-Packard (HP) which are reportedly developing their own tablets which will run on Windows 8.


While Enderle believes the Surface shows potential, the success of the product will ultimately depend on how much money Microsoft is willing to dedicate to the marketing and distribution of the product.


"On paper (the Surface) is a strong offering. If Microsoft spends whatever it takes to market and seed the product, it will be a success," he said.


"It's a huge marketing effort. A lot of the weight is going to be on the convincing consumers that Microsoft's product is better. This is potential for it to be a lot better than the iPad, but if they (Microsoft) can't explain it to the public, then they lose," he added.


More from CNBC.com


Jun 19, 2012 6:09PM
If you can sign it like a mobil credit card machine, it'll sell.
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