Microsoft and Tablets: A Failure to Launch Could Hurt Core Business

If Microsoft is too slow developing Windows-based tablets, its bread-and-butter enterprise business could soon pay the price, according to industry analysts.

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Wed, January 05, 2011

CIO — What are the implications if Microsoft (MSFT) fails or falls behind in the tablet PC race, which at its current pace, is a decent possibility?

The worst-case scenario is that the tablet frenzy will eat into Microsoft's core business: the enterprise. This could happen if Microsoft can't pull together a legitimate Windows-based tablet PC, and do it soon, according to industry analysts.

IT departments are starting to embrace and support iPads and the few existing Android-based tablets. If Microsoft is too slow on tablets, by either shrinking desktop OS Windows 7 to fit or waiting two years for touch-friendly Windows 8 (or whatever it will be called), it will give the iPad and other non-Windows tablet players time to win over corporate America. Each tablet purchased by an organization may leave a Windows 7 laptop sitting on the shelf. That's bad news for Microsoft.

In a recent blog post, former Directions on Microsoft analyst and current Silicon Alley Insider editor Matt Rosoff predicts Microsoft will be in grave danger if its tablet strategy resembles its slower than molasses smartphone strategy.

Rosoff cites a poll of over 2,000 Americans showing that 20 percent of respondents plan to buy a tablet PC in the next three years, and 40 percent of those people plan to use their tablets for work purposes. While this is music to the ears of the established Apple and companies like RIM and HP (HPQ) that have at least announced tablets, it only puts more pressure on Microsoft to get the ball rolling.

[ For complete coverage on Microsoft's Windows 7 operating system -- including hands-on reviews, video tutorials and advice on enterprise rollouts -- see CIO.com's Windows 7 Bible. ]

"It has dire implications for Microsoft's core enterprise business — each tablet potentially replaces corporate purchases of laptops running Windows, and requires IT departments to support non-Windows clients to connect to corporate applications," writes Rosoff.

"Once that happens — as it has with the iPhone — IT departments might begin to question why they're running so much Microsoft back-end software like Exchange for email, giving competitors like Google (GOOG) a wedge into Microsoft's most important business."

What's still up in the air — and will likely be revealed this week at CES in Las Vegas — is how Microsoft will take Windows 7 and make it tablet-ready with either Intel (INTC) or ARM-based chips, and get some devices out into the market. Today's confirmation that Windows 8 will work with ARM chips for tablets doesn't really solve the current problem because Windows 8 won't be available until 2012, which gives Apple, RIM and others basically an eternity to make consumers and businesses forget about Windows-based tablets.

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