Microsoft Surface and Windows 8 are Transitional Moves That Will Pay Off Big Time Within Five Years
It is a move toward a full featured operating system on a tablet that Apple and +Google could not have made with their tablets, and one that they will be slow to follow now.
By the time Apple grew the iPad out of the iPhone, iOS devices had eclipsed the MacOS as Apples primary source of income. It would have cost three times as much to make a MacOS tablet as a limited and low powered iOS device.
I had been using a Motion Control TabletPC running stylus optomized Windows for five years before the iPad came out and it was worth every penny of the $2,000 asking price… but Apple would have sold less than 1% as many >$2,000 TabletMacs as <$800 iPads. It would have been a failure that delayed the tablet market for years.
In hindsight, Apple did exactly what it should have done.
Google would have had an even bigger failure on its hands if it had tried to replace the desktop. The market share for Linux on the desktop is a rounding error on the Windows share. By the time they were bringing Android tablets to the market, the TabletPC I was using was a Lenovo that cost me $1,600. How many $1,600 Android tablets do you think would have been sold? My guess is a number that is so close to zero as to be statistically equivalent.
Google also did exactly what they needed to do and were fantastically successful at it.
Now, the cost of a tablet able to hold a full desktop OS is down to the $1,000 mark and Microsoft is making the move that in five years will be seen as exactly the right one for them. They have been eyeing this move for years and the Surface with Windows 8 is just the transitional opening salvo. They may not expect to sell 10 million Microsoft Surface Pros this year… they do expect to be selling 100 million running Windows 9 in 2018.
Apple is heavily invested in the iPad so they will be reluctant to put billions into developing a MacOS tablet that will have a slimmer profit and require another billion on modifying MacOS to touch and stylus. I don't think they will have a choice five years from now but they will be playing catchup with Microsoft.
Google is in an even more precarious position- but they also have a far greater opportunity from it. The Android tablet market will continue to grow for a few years but what do they do when a Windows Surface device running Windows 9 costs $299? They can only compete on price then and that means ever slimmer profit margins. I think their market share will start to shrink in two or three years in the developed world while it continues to grow in the developing world where the $100 difference is truly significant. That means the smart thing for Google to do is go after the emerging markets and try to establish a solid presence Android tablets that they can use to transition to a full powered Android Linux distro.
There are a few billion customers out there who's lives would be greatly enriched by computers and Google has a chance to be the one to bring that to them. This could instill loyalty and familiarity that carries on for a decade or more.
Apple and Google look to be fighting the war of 2013 while Microsoft is setting itself up strategically for the war of 2018.
Apple looks to be in the worst position as I don't really see a future where they will gain market share. They will continue to be a solid supplier of technological devices to those who are emotionally attached to the style and aesthetics and I expect them to continue to sell billions of dollars of iDevices every year. They just won't have a repeat of the anomalous growth spurt that the timely introduction of the iOS platform gave them.
Google has a huge opportunity in the emerging markets and I think they are smart enough to engage in that. In five years they could have a market valuation two or three hundred billion more than they have today. If they play their game right, they could be the first company to pass the trillion dollar valuation mark some time in the 2020s.
This isn't a sure bet because Microsoft's back is up against the wall and they will do what they have to do to survive… and they are very good at what they do.
Microsoft is playing a smart game and one that will probably see them with a valuation higher than Apple in five years… this will probably come about through their share price rising while Apple's falls. If their play for the tablet market with a full OS works as well as I expect it to, they may be able to target the developing world almost as well as Google can. That actually may be the true purpose of Windows 8 RT. The $100-200 difference in price between devices running the "light" Windows 8 and the full version doesn't mean a lot when seen through the eyes of someone living in a country where making $50,000 is normal… but when normal is $5,000, that $100 starts to mean a lot.
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