Microsoft's New Venture Shows Key Strategy
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It is fair to say that with all the hype Apple’s (NASDAQ: AAPL) iPad has generated, all eyes seem to be on the company to see how it could possibly improve or where it plans to go from here. Strategically, Microsoft (NASDAQ: MSFT) has used this as its ‘smokescreen’ for its moves for world dominance.
Tongue-in-cheek aside, there are several things that are making 6th and 7th page news which the savvy investor should take note of.
What is Happening
Recently, Microsoft has invested a hefty $300 million in a new joint venture with Barnes & Noble. Such a move is brilliantly subtle, and rarely raises eyebrows from companies such as Apple, though other eReader manufacturers like Amazon are squirming in their seats. Microsoft’s investment in the Nook has many predicting this as a push to provide e-books and articles across myriad devices while simultaneously spreading the reach of Windows 8.
For Barnes & Noble, Microsoft's deep pockets are an answer to prayer. The company still struggles with issues that ultimately pushed its former rival Borders into bankruptcy, namely being a book seller in an online world. And while Amazon charges ahead with its plan for its first official store in Seattle, which will offer its line of Kindle products, as well as other key brand merchandise, Microsoft sneaks in to position itself as a dominant provider of eReaders.
Details of the deal centered around the Nook application for Windows 8, Microsoft's main operating system. A proverbial ‘win-win’ for both companies, the struggling book seller could use the capital boost and Microsoft can continue to flood the market with several devices supporting Windows 8 to make it the most viable and convenient product. After all, what would be the most common-sense thing to do if the technology world ran on Windows? Skip all the hassle of fixes and patches and buy more Windows devices, including phones, tablets, and software.
Currently, Nook runs on Google’s (NASDAQ: GOOG) Android platform. This will not last long as it is reasonable to assume Microsoft will spread the Windows 8 agenda. However, this could put Amazon in a tight spot. Will it change to a Windows based platform? Currently, Amazon controls about 60% of the e-book business in North America. That is a hefty number in terms of Android operators that could be converted to Windows users.
But this is not the only play Microsoft is making. It is also boxing out long time browser competitor Mozilla Firefox. In a recent press release, Mozilla's top lawyer began lashing out at Microsoft's barring Firefox from Windows 8 devices that use ARM (NASDAQ: ARMH) processors.
On its devices, users will no longer have a choice of browser, but will be forced to use Internet Explorer. This isn’t the first time Microsoft has tried to position itself in the ‘war of the browsers’, but it is one of the more strategic moves it has made. A decade ago, Microsoft literally destroyed browser pioneer Netscape with a similar move.
Mozilla isn't considering legal action at this time. It is still considering releasing a version of Firefox for specifically for Windows 8 devices like the phone, tablet, and a future nook. Microsoft’s Deputy General Counsel David Heiner has cited security and power management problems for the bar on the browser. Running multiple browsers on a Windows device would mean a bigger attack surface for those trying to compromise those devices.
IE has been Microsoft’s method of dominating devices for years. It wasn’t until Google’s creation and spread of Chrome in 2008 that it actually had a viable competitor. Now it would seem that Microsoft is using subtlety to compete, through spreading Windows devices (with the nook) as well as trying to “improve user experience” by barring competitive browsers from its devices.
What it Means
Microsoft has now established a presence in the eReader world which has been dominated by Amazon and Samsung. Now, it can take aim at the tablet market with its overly active involvement in Intel’s (NASDAQ: INTC) ultrabook product designs. Finally, through spreading these products with its own software and making competitors software appear as more of a hassle, it is solidifying its position on several levels. With that kind of momentum, it could do heavy damage to the Apple, and even the Google stranglehold.
What to Watch Out For
Microsoft is not the only one using this time for positioning against its competitors. Intel’s CEO Paul Otellini has set his sites his nemesis ARM. He claims there is definite vulnerability of the ARM chips running Windows 8 during a presentation to investors earlier this week.
Intel showed off an ultrabook with a touch screen running Windows 8, demonstrating how easy it is to switch between the touch-centric Windows 8 Metro mode and the classic keyboard-mouse based Windows, so-called legacy mode. The problem with ARM chips is the compatibility with legacy mode of Windows which would have huge ramifications for any corporate applications. With leaders in every business wanting to preserve their investment in the technology already in use at their company, this would mean a serious problem for ARM, as well as its suppliers such as Qualcomm and Nvidia.
Intel has an uphill battle when it comes to the tablet market. However, a partnership with Microsoft could be just what it needs to solidify its position.
Timing is everything in business. Missed opportunities can devastate companies. On the other hand, strategic moves in the background, like those made by Microsoft can position companies for swift and furious power plays. Microsoft’s strategy is bold, and multi-leveled. I see this move as yet another example of powerful and strategic leadership and will undoubtedly result in positive performance for the company.
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