Microsoft aims to straddle two worlds with new Surface tablet - San Antonio Express

Microsoft's lumbering crawl into mobile technology had many writing off the titan of computer software as a has-been.

But after unveiling its first tablet, called the Surface, some analysts advise not to count the company out just yet.

Several years behind its Silicon Valley rivals, Microsoft is betting it can play catch-up on tablets and smartphones by leveraging its dominance in the workplace and its success in the living room.

Just imagine Microsoft offering its Office software exclusively on the Surface while providing access to Xbox games and videos. It could be the right mix of professional and personal elements, a combination that Apple and Google haven't been able to achieve fully. Then add the other online assets Microsoft has amassed over the years: the videoconferencing service Skype, the professional social network Yammer and the search engine Bing.

The potential is great, analysts say. That is, if the notoriously bureaucratic tech giant doesn't end up repeating its past mistakes.

“Microsoft has had all the pieces for a consumer strategy for years, and they've totally and utterly failed time and time again,” said Michael Gartenberg, an analyst at Gartner research. Standout failures include Microsoft's Zune music player and the Kin smartphone, which were panned by critics and fed the reputation of a company that was out of touch with consumers.

“The trick is if they can tie it all together into a compelling story and get consumers to buy into a whole ecosystem of devices and apps, which is what Apple has done so well and Google has done well, too,” Gartenberg said.

On Tuesday, the day after announcing the Surface, Microsoft's stock shot up by nearly 3 percent, though the shares are about half the value of their high reached in December 1999.

When it comes to tablets, Microsoft hopes office workers will want the Surface's keyboard and stylus to produce Excel spreadsheets or PowerPoint presentations and then take the gadget home to watch movies.

Microsoft's Office suite of apps has a stranglehold on businesses. It's also gained a foothold in households with its Xbox Live, which has 40 million subscribers. The service charges customers a fee to play games online and to watch streaming videos through their game console, which has sold 66 million units.

When it announced the Surface in Los Angeles on Monday night, CEO Steve Ballmer said the device will straddle the tablet and PC worlds. The higher-end Surface will run the full version of Windows 8.

“No compromises,” Ballmer said. Microsoft didn't announce a price or shipment date.

Apple, in contrast, appears to have drawn a brighter line between its tablet and Mac notebook, which for now run different operating systems, analysts said.

Microsoft's move was prompted by the iPad's runaway success. Tablet sales are expected to skyrocket 54 percent to 107 million units this year, according to research firm IDC. In 2016, consumers will buy 221 million tablets, IDC said this week.

Tablets are stealing away laptop and computer owners and even beginning to win over some businesses. This year, PC sales are expected to rise just 5 percent to 383 million units, compared with 10 percent growth the previous year.

Microsoft has struggled to keep an entrepreneurial edge given these sea changes in the computing world, experts say.

When Ballmer took over day-to-day operations from Bill Gates in 2000, he tried to thin out a bloated management structure. But engineers and marketing teams often worked in different buildings and traveled by shuttle bus across the vast Redmond, Wash., campus for meetings.

Keeping both software and hardware development under the same roof is a new philosophy for Microsoft. In doing so, it's borrowing a page from Apple's playbook.

“If imitation is the sincerest form of flattery, the compliments from Microsoft poured down like a torrential storm on Apple last night,” said analyst Brian White at Topeka Capital Markets.

Even Ballmer, Microsoft's famously tough-talking CEO sounded downright Zen and Apple-inspired as he introduced the Surface.

“We believe that any intersection between human and machine can be made better when all aspects of the experience â€" hardware and software â€" are considered and working together,” he said at Monday's launch event in Los Angeles.

But the move to develop its own hardware device also risks alienating key partners who have helped put the Windows software in the vast majority of households and businesses around the world. But Microsoft has little to lose, since PC manufacturers are having little success with their own tablets.

Rick Sherlund, an analyst at Nomura Securities said Microsoft's hardware partners “are no doubt unhappy” about the prospect of competing with Microsoft's tablets, particularly since Microsoft set a high bar with Surface.

Surface will come in two versions, both with screens measuring 10.6 inches diagonally, slightly larger than the iPad. One model will run on phone-style chips, just like the iPad, and will be sold for a similar price. Another, heavier and more expensive model, will run on Intel chips and be capable of running standard Windows applications.

Microsoft's position also is complicated by the possibility that consumers will favor its tablet over other Windows tablets for exactly the reasons Ballmer articulated: it's made by the same company that wrote the software. That puts an end to the old Windows PC support runaround, where PC makers blame Microsoft for product failures, and Microsoft blames the PC makers. If something's wrong with Surface, buyers will know who to call.

Ronan de Renesse, an analyst at Analysys Mason, said Microsoft can afford to alienate PC makers when it comes to tablets, because they've captured such a small share of the market. Samsung Electronics and AsusTek Computer Inc. are the only PC makers who have appreciable market share in tablets, and they only make up 10 percent or so, by his estimate. Other major competitors to the iPad are Amazon.com Inc.'s Kindle and Barnes & Noble Inc.'s Nook.

“Microsoft's move in creating its own tablet is the sign that PC manufacturers have lost the game,” Renesse said.

Microsoft's partners are mum. Hewlett-Packard Co. and Acer, both of which make PCs and tablets, had no comment on Microsoft's announcement. Samsung did not respond to requests for comment.

Microsoft has “very little slack to make this new strategy relevant to everyone,” said Al Hilwa, an analyst at IDC. “Microsoft is trying to give you multiple access points to their ecosystem of content and apps, which is what Apple has done very well and Google is doing, too. It will be a race of giants.”

The Associated Press contributed to this report.