Tablets Are Changing, Microsoft Needs To

Chris is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Microsoft (NASDAQ: MSFT) is in dire need of fixing the vanishing personal computer. If it doesn't soon enough, the consequences of not adjusting to consumer preferences could be the straw that breaks the camel’s back.

The problem with Microsoft is that it still treating the symptom rather than the disease. At this point, it seems clear that the tiled, touch-friendly Start screen and the lack of a boot option to the familiar "desktop" interface scared off some people who might otherwise have upgraded to Windows 8. But instead of fixing an operating system or trying to revitalize the dying personal computer demand, Microsoft must make stronger efforts towards changing with the consumer landscape. And that consumer landscape like’s tablets.

The tablet is one of the fastest-growing technologies in the history of innovation. In 2012, there was a 78.4% year-over-year growth in tablet shipments, which exceeded 128 million units. Shipments are forecasted to surpass 2.2 billion units by 2017, with revenues reaching $814.3 billion.

In order to capture some of this tablet growth, here are 2 things that Microsoft needs to do:

1. Make windows shine on tablets — cheaply

Microsoft desperately needs a successful mobile strategy. And the only real way to do that is to offer more for less.

In other words, if Microsoft wants to leverage Windows in the mobile space then it needs to really leverage Windows. The Windows RT version of Surface failed in part because it was a crippled version of Windows 8; it's time to retire it. The Surface with Windows Pro, by contrast, could be a hit if its price falls far enough. And if Microsoft pushes hard to convince buyers that they can accomplish a whole lot more with a full-fledged Windows tablet than they can with competing products.

Microsoft needs to show that a Windows tablet — derivative of the Surface, or one based on the new quad-core "Bay Trail" chips — can offer desktop PC-class performance at tablet prices. We know tablets are mobile. Microsoft Stores need to feature a Windows tablet or convertible running the flashiest piece of software it can, on a conventional desktop monitor, with the price tag prominently displayed. The message: "All this for $299!? Why would I ever want an Android tablet?"

2. Find a mobile apps tiger team

Over $8 billion dollars was spent on tablet applications last year alone. Tucking your Android or iOS phone in your pocket is an unconscious decision. And as more game developers choosing to write for iOS and Android, fewer are around to focus on Windows. There's another key advantage for iOS and Android, too: chances are that you can play the same game on your iPad and iPhone, or on your Android phone and tablet. You can't often say the same for Windows Phone and Surface.

If users can't share apps, files, and other documents between the PC, notebook, tablet and phone then they're going to start looking elsewhere. Microsoft's realized this with its core apps, including Office and the Xbox. Netflix traverses the range of Microsoft's platforms, but that's about it.

There is no easy fix here. If Microsoft can't develop the apps it needs itself, it's going to have to go out and buy them. This is the Nintendo problem, writ large. Without AAA third-party software, Microsoft will have to do it alone.

Follow the leader

It is popular belief that Apple (NASDAQ: AAPL) was an innovator with its introduction of the iPad, which then subsequently led to the company being the first to successfully penetrate the tablet industry. The iPad still accounts for $32 billion in revenue for Apple and has had over 300% growth since 2010. What most people do not know, however, is that Bill Gates was actually one of the first people to come up with the concept of touch screen technology. Gates first demonstrated a tablet back in 2000 and released a tablet OS version of Windows in 2005.

Gates himself admits, however, that Steve Jobs did a better job with the engineering and timing of the iPad's release, as well as with the millions of applications that users can download onto the tablet. With that said, this does not mean that Microsoft cannot try again.

In fact, recent surveys have indicated that Apple is losing share to Google (NASDAQ: GOOG) in both usage and revenue. In fact, Google just opened up the world's first tablet café to take advantage of the tremendous demand for the devices in industrialized countries. This tablet cafe could take hold in places like Africa simply because most people cannot afford to buy the device alone. If the Google tablet becomes the consumer preference in Africa then revenues have the potential to grow tremendously, especially since Africa's internet infrastructure is just starting to develop. 

Microsoft has the opportunity to steal market share as well, but they must rethink their strategy and allocate the necessary resources before it's too late. 

Foolish conclusion

The PC is dying. It's inevitable, and Microsoft is merely rearranging desk chairs on the Titanic. But in this case, there's a chance the ship could make harbor before it sinks.

Notebooks will eventually give way to tablets, whether or not they have a keyboard attached to them. Microsoft won the desktop, and it won the notebook. Now it needs to win tablets. If it shows weakness now, it will be buried.

Can Microsoft throw enough money at these problems to fix them? It may have to. It can patch Windows 8 all it wants, but the apps and mobile problems require more extensive surgery, and the time to act is now.

There's no doubt that Apple is at the center of technology's largest revolution ever, and that longtime shareholders have been handsomely rewarded with over 1,000% gains. However, there is a debate raging as to whether Apple remains a buy. The Motley Fool's senior technology analyst and managing bureau chief, Eric Bleeker, is prepared to fill you in on reasons to buy and reasons to sell Apple, and what opportunities are left for the company (and your portfolio) going forward. To get instant access to his latest thinking on Apple, simply click here now.


Chris Johnson has no position in any stocks mentioned. The Motley Fool owns shares of Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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