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By outcompeting its partners, Microsoft is endangering them

"[O]ur Surface devices will compete with products made by our OEM partners, which may affect their commitment to our platform," writes Microsoft Corp. (MSFT) on the fourteenth page of its annual report filed with the U.S. Securities and Exchange Commission.

As noted by The New York Times, the quote represents Microsoft's most forthright comment regarding the fact that the media and public has largely perceived Microsoft's first-party Windows 8 tablet as superior to rival designs from OEM partners.

Microsoft CEO Steve Ballmer says that 10.6-inch Surface tablet is merely "priming the pump" for OEM partners' Windows 8 tablets.  But his filing indicates clearly that he and his company are aware that OEMs may be damaged by their inability to compete with his slick tablet offering.

There's some risk to Microsoft from this approach.  Competing with a customer ruined the relationship of Samsung Electronics Comp., Ltd. (KSC:005930) with Apple, Inc. (AAPL) and likewise Google, Inc. (GOOG) with Apple.  

"Surface" may prove poison to Microsoft's own. [Image Source: Microsoft]

However, not competing is ultimately an even more risky choice.  After all, it's hard to argue that Google is worst off for owning the world's most-used smartphone platform, despite the headaches that decision earned for it.

Likewise, if Surface does well it may create some headaches regarding OEM relations, but it would also be a boon to Microsoft's empire of holdings.

Source: SEC

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RE: They had to
By TakinYourPoints on 7/27/2012 8:02:57 PM , Rating: 0
If it weren't for their excessively priced hardware, they'd have never surpassed Microsoft.

Microsoft's profit margins are significantly higher than Apple's, but that comes down to the fact that software carries far more profit than hardware. Physical production and commodity prices guarantees that hardware will always be less profitable per unit.

The only way Apple beat Microsoft in net profit was by exceeding them in gross revenue by over double, and that only happened a bit over a year ago. Selling hardware by itself won't make you bank compared to selling software. Selling a LOT of it can.

As for being excessively priced, a comparable smartphone or tablet costs about as much as what Apple sells. For a while the alternatives like the Xoom cost more for far inferior hardware specs. Now everyone is undercutting price at the cost of profit, look at the Nexus 7. Ultrabooks are about in line with the Macbook Air, and even the Mac Pro is in line or cheaper than a Dell Precision with Xeons and ECC RAM. Apple doesn't make econoboxes or low-end laptops like you see at Best Buy, that's the main difference.

RE: They had to
By Cheesew1z69 on 7/27/2012 8:04:27 PM , Rating: 2
And yet, Apple is sold at Best Buy...

RE: They had to
By TakinYourPoints on 7/27/12, Rating: 0
"Game reviewers fought each other to write the most glowing coverage possible for the powerhouse Sony, MS systems. Reviewers flipped coins to see who would review the Nintendo Wii. The losers got stuck with the job." -- Andy Marken

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