Microsoft Launches "TABLET WAR" with Apple
Umang is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
One of the reasons for the success story of Apple (NASDAQ: AAPL), currently the largest company in the world, is its ability to do it all by itself -- one of the lessons taught by the great Steve Jobs during his leadership trainings.
On the other hand we have Microsoft (NASDAQ: MSFT) whose business model in the '80s and '90s has been dealing in their core area of strength. They have been providing software (Windows) and integrating it with any hardware by just paying its license fees.
Both the models worked out well creating the two biggest giants in the technology world. But the journey for Microsoft of late has been not so good especially after the launch of Apple’s iPad (different versions). This is visible from the Sales figure drawn below:
These figures clearly indicate that though the revenue of iPad is less than Microsoft's Window but the trend as we can see is that the sales figure of Microsoft is going down where as revenue generated by iPad is clearly increasing and catching up day by day.
This has forced Microsoft to change its existing business model and they are making an attempt to enter into the same model as Apple, that is, end to end production.
Google (NASDAQ: GOOG) initially tried to replicate Microsoft’s model by offering Android to any hardware maker who wanted it. This helped them to allow Android to dominate the Smartphone market but with iPad around the corner this success did not last long. Then Google indicated to follow the same model as Apple which is visible by the acquisition of Motorola Mobility (maker of smartphones) with a lump sum of $12.5 billion.
This step of Microsoft is just an initial step for the start of the tablet war between the two giants. The strategy applied by Microsoft will determine how competitive it would be to iPad. The strengths that Microsoft has as compared to Apple’s iPad are:
Entertainment package with Storage Capability: There are rumors that Microsoft could offer a dual combo package which would mean a direct competition to Apple’s iTunes, Google’s play and Amazons services on its tablet. The icing on the cake would be the integration of its gaming capability in the name of Xbox. If Microsoft can manage to master shopping experience and cover its bases across music, television and movies they could have a huge advantage.
A step ahead in the technology: They have planned to introduce Windows RT(a tablet version of windows 8). This would mean they could offer a better display, storage capability and a higher memory. This would make it far superior to the other existing tablets.
Competitive Pricing: The dream of the great Steve Jobs was to offer iPad’s at a reasonable pricing. But still there is scope in the tablet world to improve on the pricing of the hardware. With the low cost on software Microsoft could latch on to this opportunity and offer a competitive pricing giving it a small edge over the iPad.
Sharing Capability: The truth of the matter is that despite the amazing technology (in terms of cool Apps) offered by the iOS they lack the ability to integrate with the rest of the software world. Now since Windows RT is just an extension of Windows 8, this could mean a seamless integration between the tablet and the PC world. This would make it more attractive for the masses.
Microsoft is attempting to throw a caution to the wind. The journey from software to hardware might not be as smooth as it looks. This is primarily because of the following reasons:
Threat to the existing alliances: Despite the huge success of iPad, Windows still remain of the giants of the technology industry. Microsoft’s bold step into manufacturing the hardware for the tablet could mean that a falling level of commitment between these hardware cos. The tablets will be in a direct competition to them and forming an alliance with its own competitor would make little or no sense.
Haunting history: Microsoft already has a bad history in hardware production. This is evident from the sustained losses and manufacturing problems of Xbox. Also the failed Zune player, a music player designed to compete with IPod.
This change is heading towards the right direction only if they manage to sustain the pressure and competition created the amazing Apple. This would mean consumers could have better services delivered at a cheaper price.
Umang27 has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple, Google, and Microsoft. Motley Fool newsletter services recommend Apple, Google, and 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.If you have questions about this post or the Fool’s blog network, click here for information.
