Microsoft makes 'radical' move by designing, selling own Surface tablets

Microsoft on Monday introduced its own line of tablets, dubbed "Surface," and in so doing broke its 37-year tradition of never competing directly with the hardware partners that have helped make Windows the most successful operating system ever.

The company didn't announce prices for the two tablets it plans to launch, or offer a definitive timeline, although it did say that the first model would debut around the time Windows 8 and Windows RT go public. The second will go on sale about three months later.

At a Los Angeles event -- a hastily-called press conference whose invitations were sent out just days ago -- CEO Steve Ballmer, top Windows executive Steven Sinofsky and others took the stage to unveil the 10.6-in. Surface, which comes in two versions, one that runs Windows RT on ARM, another that runs Windows 8 Pro on an Intel chip.

"It was always clear that what our software could do would require us to push hardware, sometimes where our partners hadn't envisioned," said Ballmer of the decision to design and build the Surface. "With Windows 8, we did not want to leave any stone uncovered."

Microsoft is gambling that the move won't alienate its OEM (original equipment manufacturer) partners.

"This is a pretty bold move by Microsoft," said Michael Gartenberg, an analyst with Gartner. "A really radical move -- as bold a move as anyone has made in this industry."

Gartenberg was referring to Microsoft's decision to cut out the middleman -- its OEMs, from Asus and Dell to Hewlett-Packard and Lenovo -- and sell its own hardware directly to consumers and businesses.

It was a move of some desperation, said analysts.

"Microsoft realizes that they're getting into [tablets] awfully late, and that they're not going to have the 1-2-3 shots at it that they have in the past," said Tom Mainelli of IDC. "So Ballmer, pretty interestingly, said 'We love our partners,' and although he didn't say 'But...' there was one there. They clearly don't feel like they can trust their partners to bring out a product that's competitive."

Gartenberg echoed Mainelli "It shows how little faith they have in their partners," to come up with compelling hardware that can take on, more than any other rival, Apple and its iPad, Gartenberg said.

"This is the first time that Microsoft has actually entered the personal computing [hardware] business, the Intel PC business," Gartenberg said of the Windows 8 Pro Surface. "I didn't hear 'HP,' or 'Dell' or 'Lenovo' mentioned even once, not a word."

But Mainelli wasn't sure OEMs had anywhere else to turn, no matter how angry they might be at the sudden competition from Microsoft.

"Partners aren't going anywhere," argued Mainelli. "Most of them have tried Android tablets, but without any success. So although this might irritate them, Microsoft knows that [the OEMs] need them."

Although both Mainelli and Gartenberg used the word "beautiful" to describe the Surface tablets, too many questions remained unanswered for them to predict whether the line will be successful or not. In other words, they couldn't say whether, in Microsoft's history of producing and selling hardware, Surface will turn out to be the next Xbox or a flop akin to the Zune music player.

"It looks damn nice," said Mainelli, "But we're left with the same question that we had leading into the press conference: How much are they going to cost?"

Microsoft's only comments related to pricing were that the Windows RT Surface would be "comparable" to other Windows RT-powered tablets, while the Windows 8 Pro model will sell for about the same as Intel-powered ultrabooks -- the thin, lightweight laptops whose average price is in the $650-$700 range.

In comparison, Apple's iPad starts at $499.

"We don't know pricing, we don't know battery life, we don't know what apps come with it, we don't know distribution or marketing, we don't know the user experience or the migration experience for the Windows 8 Pro [Surface]," said Gartenberg, ticking off the unknowns.

Microsoft did, in fact, offer some answers that addressed some of the items on Gartenberg's list: The Surface will be sold in some markets' versions of the company's online store, and in Microsoft's retail stores, which are in the U.S. only.

"With hardware, actually getting to see and touch it makes all the difference in the world," said Directions on Microsoft analyst Michael Cherry, adding that the company "said nothing about battery life."