Analysis Microsoft stubbornly refuses to let go of making hardware, but now the reasons why CEO Satya Nadella has not followed his clear instinct to ditch devices (except Xbox) are becoming clearer.
We have analysed many times why Microsoft should not make smartphones and tablets, mainly because of conflicts of interest with the OEM partners which have always been the basis of its model. However, there is the defensive reason that without the former Nokia products, there would be very few Windows handsets at all. The software giant is ill-equipped, in terms of its business model and its capabilities, to be a vendor of mass market hardware.
Yet it does need Windows 10 to live up to its promises of spanning every kind of device and screen, which means continuing to provide users, especially in the business sector, with the option of a Windows smartphone.
Surface grows up
And the Surface range is starting to justify the approach that software platform giants need to create and drive new form factors themselves by showcasing the capabilities of their operating systems on their own hardware. Microsoft has taken that tack in the past, though usually retreating quickly once a particular product gained traction among "real" hardware vendors (as seen with its Wi-Fi access point, for instance).
Google has done the same with Nexus. Neither of these represents the integrated hardware/platform business model of Apple – briefly chased by Nadella’s predecessor Steve Ballmer, with the resulting failure of the Nokia devices acquisition. Instead they show the need for a new OS to have worthy devices.
With the first Surface tablets, it was clear that Microsoft should have left this task to its partners. Google may have complained, when it launched the first release of Android for larger screens, that very few device makers could produce a quality experience to live up to the OS’s potential. But that is not true of Microsoft, which has established and capable customers such as Acer and Asustek.
They were vocal in their misgivings about the Windows giant competing with them with Surface.
However, between the unloved Surface RT and this week’s launch of the Surface Book, there has been a significant change, partly driven by the emergence of Windows 10 and partly by the decline of the conventional PC. It is imperative that W10 – Microsoft’s last chance to remain a company with its own OS rather than just a multi-platform service provider – succeeds in that post-PC space which is currently being defined, and will include some combination of tablet touchscreens and notebook keyboards, at the base level. There have been all kinds of experiment with these hybrids, but unexpectedly, Microsoft’s Surface Pro tablet-with-keyboard has proved definitive, especially since W10 came along.
To prove that point, we only had to see Apple head-to-head with its old enemy with its launch of the iPad Pro, a clear response to the Surface Pro. Now Microsoft has returned the compliment with the launch of its first notebook, the Surface Book. The dividing line between a professional tablet and a laptop is blurring, but increasingly it seems that, after many experiment with post-PC form factors, this is where the successor to the PC will be found.
The fight for the post-PC space
Both Microsoft and Apple are looking to colonize the space via a pincer movement. Both are now offering a beefed-up tablet with optional keyboard, and an ultraslim laptop, though the MacBook Air does not yet have a touchscreen, and Apple CEO Tim Cook last week insisted that, unlike Microsoft, his firm had no plans to converge its mobile/touch and notebook/desktop operating systems.
So it’s back to the good old days of Windows and Apple Mac fighting it out for the business base – though with the critical difference that Microsoft is making its own hardware rather than relying on its PC OEMs. Just as one of the problems for Windows Phone was the conflict of interest between the Microsoft/Nokia alliance and the bid to create a broad device ecosystem, so Microsoft risks the same effect in the emerging market for tablet/notebook hybrids.
That form factor, with its assorted variations from Intel Ultrabooks to Surface Pro tablets, will be vital to propel Windows 10 growth, but despite the latter-day success of the Surface family, Microsoft cannot dominate the post-PC territory all by itself. To fend off MacBooks, iPads, Chromebooks and Android devices, it needs to have a broad base of OEMs making innovative Windows 10 products. If it confines its Surface launches to a leadership role – demonstrating to OEMs, developers and users what can be done with W10, as Google does for Android with Nexus – that should be possible. But if it competes with its own partners, it risks driving them towards Linux.
The Surface Book sports a 13.5-inch touchscreen which detaches to work as a standalone tablet. It claims up to 12 hours of battery life and comes in flexible configurations, with choices of memory (up to 16GB of RAM), hard drive size (up to a terabyte) and processor speed. The device runs on sixth-generation Intel Core i5 and i7 processors with Intel HD graphics, and there is an optional Nvidia GeForce GPU. All that comes at a price - $1,499 for the entry level model, up to $2,699 for the top end.
The Surface Book has a decent chance of becoming a successful device in its own right, and not purely as an accelerant for new W10 form factors – though that will be a double-edged sword for Microsoft, whose PC partners still have to pay for Windows licences for larger gadgets, and which have Chrome and Linux alternatives in their sights too, if they feel squeezed out of the post-PC segment. On the other hand, a successful Surface could help keep Windows relevant and in-demand, proving to the OEMs that there is still a good reason to stay loyal to the old platform.
The new Lumia smartphones
The situation is very different for the Lumia smartphones, which are not defending a dominant position, like Surface, but struggling with single-digit market share and no obvious role in life except to ensure that W10 options are available across all form factors.
The first Lumia smartphones designed specifically for Windows 10 made their debut with all the genuinely strong attributes of former Nokia products - the innovative Windows Phone user interface, now the basis of the whole W10 experience: the top class imaging. But they launched without US carrier support and with the usual challenge of a far smaller apps base than Android or iOS.
Since Nadella slashed into the former Nokia business and pulled smartphone activities back to fewer models and markets, the main focus is the enterprise space, and the idea that W10 smartphones can be companions to their more successful tablet and PC stablemates – an argument often used by Apple, of course, which believes that adoption of one of its devices nearly always leads to the uptake of others. It is a cornerstone of the W10 strategy – and another borrowing from Apple – that the new Microsoft OS should do the same, providing a sufficiently enticing user experience for customers to want it on all their screens, and offering the simplicity of a single set of apps and interfaces on each one.
"These devices promise to fuel even more enthusiasm and opportunity for the entire Windows ecosystem," claimed Nadella in a statement, while devices chief Panos Panay went further, claiming that the W10 handset would be a natural extension of the huge in-stalled base for the operating system on other products.
"Now, we want to put Windows in your pocket," he said. "110 million people using Windows 10 right now. If you haven't thought about these phones, wake up! Spend a minute, with the universal apps coming. 110 million users in eight weeks - the opportunity is unbelievable."
Microsoft has been gradually moving towards a unified experience across all screens, building on the Universal Apps platform that first appeared in Windows 8. Facebook, Instagram and Uber were among those announcing Universal Apps which work in the same way across different W10 devices. Also, with a new Display Dock, users can connect a Lumia to a monitor, keyboard and mouse, turning the smartphone into a small desktop PC.
Like Apple again, Microsoft has announced a flagship smartphone in two screen sizes. Both the 5.2-inch Lumia 950 and 5.7-inch Lumia 950 XL have 20-megapixel cameras with high level imaging functionality (a key Nokia strength), including 4K UHD video capture. The handsets run on Snapdragon 808 and 810 processor and cost $549 and $649 respectively. They are due to go on sale in November.
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