With reorg, Microsoft bets big on home-grown hardware
New group dedicated to devices means a head-to-head battle with OEMs, analysts argue
Computerworld - Microsoft's reorganization is the biggest shot yet fired against the company's core partners, the computer makers who have made the software developer a technology giant, analysts said today.
"There were clear lines of demarcation where Microsoft's efforts ended and OEMs' started, but this could challenge OEMs down the road," said Patrick Moorhead, principal analyst at Moor Insights & Strategy, in an interview Thursday.
Moorhead was referring to the corporate reshuffling announced earlier today by CEO Steve Ballmer -- specifically the creation of a hardware group within the company.
The Devices and Studios Engineering Group will be led by Julie Larson-Green, who will oversee all hardware development, from the Xbox and Surface to mice and keyboards. In his memo to employees today, Ballmer said that she would also assume responsibility for the "supply chain, from the smallest to the largest devices we build."
Larson-Green, a former lieutenant to Steven Sinofsky, who until he was ousted last fall ran the Windows division, was most recently head of Windows engineering, and shared responsibilities for desktop and tablet OS team with Tami Reller, former Windows CFO.
Because Devices and Studio Engineering will be one of just four engineering groups -- the others focus on operating systems, applications and services, and cloud and enterprise -- and because Microsoft has never had a unit at that level dedicated to devices, Moorhead interpreted the reorg results as a major change in direction for Redmond.
"This is the first time they have ever had a division called 'Devices,'" said Moorhead. "To me, that means Microsoft is very, very serious about hardware, as serious as Apple is about tablets."
Unless Larson-Green's fiefdom ends up smaller than the weight the new structure seems to assign it, and unless Ballmer's mantra of "devices and services" is a smokescreen, the company must expand its hardware offerings.
Moorhead certainly expects that to happen. "One of the first things they'll do is a Surface notebook," Moorhead predicted. "Second, they'll do a smart watch or some kind of wearable [computer]."
And because turning a profit on hardware, PCs included, requires a large-scale commitment -- necessary to purchase components at reasonable prices -- Microsoft will, in effect, become a direct competitor with its OEM (original equipment manufacturing) partners, the Dells, the HPs, the Lenovos of the world.
"PCs require scale, and are just not suitable to niches," said Moorhead, a former executive with AMD, the chip-making rival to Intel. "They were acting this way before [with the Surface tablets] but this is whole new level. This is such a big change that I'd argue it's a reinvention of Microsoft."
Another analyst agreed.
"Microsoft doesn't have an incredible track record on hardware," said Bob O'Donnell of IDC. "Surface isn't exactly tearing up the charts. For [hardware] to become a core focus, I just don't know, it seems odd to me. But they will expand their hardware. I expect a Surface phone, more Surface tablets, including a smaller tablet, and more.
"Microsoft has taken shots at OEMs before," O'Donnell added, referring to the surprise debut a year ago of the Surface tablet line. "But the [Devices and Studio Engineering] group reinforces that. This is another shot at the OEMs, no question."
- 'Nadella Effect' makes Ballmer $2.8B richer
- Microsoft reveals bankruptcy of devices strategy by dumping Nokia feature phones
- Microsoft may drag out layoffs for a year
- Surface survives Microsoft cuts, but tablet strategy remains muddled
- As it lays off workers, Microsoft also kills its low-end Nokia X smartphones
- How Microsoft announces layoffs will show the company's PR IQ
- Why Microsoft isn't spooked by the Apple-IBM alliance
- Microsoft boosts OneDrive storage to free terabyte
- Microsoft plans price war to stymie Chromebook growth
- Microsoft gets real, admits its device share is just 14%
- Software Asset Management: Ensuring Today's Assets Today's trends like BYOD and SaaS are new and exciting in terms of how they will help make our jobs more productive but...
- Trends Shaping Software Management: 2014 Most IT executives recognize the relationship between mobile computing and worker productivity, and have long issued notebook computers and other mobile devices to...
- Software Asset Management: Pay Attention or Pay Up There is a wide range of options for managing software assets, from in-house solutions to the cloud to managed services providers. Read this...
- Are You Prepared for a Software Audit? Just the word "audit" is enough to make anyone shiver, and when it comes to a software audit, the reaction is no different....
- Top 4 Digital Signage Fails Join RMG Networks for a look at four of the most common reasons digital signage fails in corporate businesses. Learn about strategies to...
- ElectricAccelerator: Dramatically Faster Builds and Test ElectricAccelerator dramatically speeds up builds and test by parallelizing jobs across clusters of physical or cloud CPUs. All Management White Papers | Webcasts