June 21, 2012

Gruber: Microsoft's Pivot Into Hardware Is Self-Preservation

Gruber nails why Microsoft has turned to manufacturing their own hardware for their forthcoming tablet, the Surface:

"The intention is obviously to slow the iPad down, but the radical shift in Microsoft’s strategy is about the fight over the profits that remain after Apple’s. The math no longer works out for the Windows you-sell-the-hardware-we-sell-the-software model. It works for unit share (cf. Android), but it doesn’t for profit share. Nothing works sustainably in business without profit — profit is the oxygen companies breathe."

That last sentence is the key to business success most consumers don't know or don't care about. Without profit, business does not work. Whine all you want about markups, but without them your favorite business goes tits-up.

Microsoft's new Surface tablet looks interesting, enough so to attract attention not only from diehard Microsoft fans but the rest of the computing world. It's bet-the-company important that it succeeds.

Without the profit to be had from their own tablet, Microsoft's days as a dominant player in (what Gruber craftily coins) the ones and zeroes racket are numbered. It's hard to believe, given Microsoft's history, that we've arrived at this day. Yet that's what Apple's incredible iPad and iPhone sales numbers have been telling us since 2007.