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Microsoft says Surface is the Apple competitor its partners failed to build

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Microsoft Surface RT stock
Microsoft Surface RT stock

Surface, Microsoft's hyped entry into the hardware market, left many puzzled. Is it Microsoft "priming the pump" as CEO Steve Ballmer originally claimed, or a more serious strategy of investment in hardware and devices? Speaking at Microsoft's TechForum event this week, Steve Ballmer's senior advisor, Craig Mundie, detailed the history of Redmond's philosophy toward Windows OEMs and how Surface came to be. "I think one of the things evolved over a long time in the PC business was we stopped some years back really trying to actively curate what the devices looked like," said Mundie, discussing the engineering and design influence involved in creating an experience and hardware that's relevant to people.

"We said, 'oh the OEMs, that's their design, they deal with it.' We got huge diversity out of that at all possible price points, but it became hard to guarantee a uniform quality of experience that the end user had," he explained. Pointing to the initial touchscreens in Microsoft's first-generation phones, there were clearly devices with better hardware than others. "If you were in front of a bad one then people said that was a piece of crap; it didn't work a damn."

"It turned out that we took the flak for the fact we had this highly variable experience."

On the software side it's been mostly consistent from Microsoft's point of view, but Mundie admits "it turned out that we took the flak for the fact we had this highly variable experience." Microsoft is now switching its focus to hardware and design. "We're paying a lot of attention to what that device looks like, what its attributes and specifications are," explains Mundie. This focus wasn't always there, even if Microsoft's intentions in certain markets were. "It turns out we had all four categories of devices [music players, touch devices, phones, and tablets] in the market place, more than one year or two years before Apple even did their first one, but for a whole variety of reasons — just business choices we made at the time — we didn't end up capitalizing."

Mundie's honest and frank admission is an approach that Microsoft usually shies away from, typically leaving outsiders to question whether the company really understands the challenges of modern, post-PC competition. Mundie also explained that Microsoft shipped Office and Windows at a scale that no other firm does. "Our beta tests are bigger than the lifetime deliveries of most people's software products," he claimed. "One of the things that constrained how fast we could change was that the corporations that were our principle customers said 'we can't change that fast,'" with enterprise CIOs avoiding major upgrades for two or three years at the minimum.

"...would there be a very high quality physical device that would go up against Apple?"

Asked if Microsoft was happy with the investment in Surface and whether it was worth the risk to existing relationships with hardware manufacturers, Mundie said it was "absolutely" worth it. "One of the big challenges that the company faced in the last couple of years was just the question of, would there be a very high quality physical device that would go up against Apple?" Mundie still believes Surface is that device, and if you're willing to pay a premium cost you'll get something with great design and aesthetics he believes. "We set out to prove with Surface that you can do that. I think that certainly people have acknowledged that."

The industry may have acknowledged Microsoft's ability to build hardware, but it now needs to prove it can sell the devices. PC sales are declining faster than projected, and OEMs are starting to look at Chrome OS as a possible alternative. Surface is off to a slow start, thanks in part to a delayed Pro model and lack of retail presence, but Microsoft's Ballmer sees it as a "real business," and it's one that the company's OEM partners will also be looking closely at. Microsoft might want to be an Apple hardware competitor, but it comes at a significant cost and investment. "It turns out it's expensive to build one of these premium grade products. You had to be willing to front the money to make that work," explained Mundie. "We were willing to do that, so we could build one of these things and I think we feel very good about that."