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Today Google (NASDAQ:GOOG) announced their new Nexus 7 Tablet, a very good implementation of a high definition 7 inch tablet based on their own Android 4.1 mobile OS. You can read about the feature details on their product page. With all the discussion on Seeking Alpha about the new Microsoft (NASDAQ:MSFT) Surface tablet and comparisons with Apple (NASDAQ:AAPL) iPad, almost none of it has been about the real battle in the tablet wars, Google and its Android mobile OS vs. Microsoft and its Win8 strategy. Win8 will have major impacts on Google's strong Android mobile strategy beginning later this year. Google has begun to fight back today with the release of the Nexus 7 tablet and new Android 4.1 OS.

First Microsoft. Two weeks ago Microsoft suddenly announced two versions of a new tablet for Windows 8 they will produce called Surface. With regards to hardware tech specs, one is a low end model based on an Nvidia (NASDAQ:NVDA) multi-core ARM CPU, and the other is based on Intel's (NASDAQ:INTC) new 22nm Core I5 Ivy Bridge CPU. The included USB ports, memory card ports, and HDMI output ports allow for Surface users to use their existing devices like hard drives, printers, mice, full size keyboards, cameras, memory cards, and large screen monitors when they are in the office or at home, but still be able to grab and go with the tablet as needed. And finally, to do any useful work in Microsoft Office requires a keyboard, so they cleverly came up with a basic version which is built in to the Surface cover. So how did the new Microsoft Surface tablets come to be, and why did Microsoft announce them so suddenly?

Here's what happened. Microsoft needs hardware to develop and test Win8 on tablets, so they worked with Intel and Nvidia to create two test platforms. These are referred to in the industry as reference designs. First Microsoft recompiled and tested Win8 for the Nvidia ARM CPU design. Microsoft also knew that including the Microsoft Office Suite was the key to keeping their corporate accounts and destroying Google Android, so they also recompiled and ported Office to the ARM CPU and came up with a keyboard in the cover. And Microsoft wanted to support the basic I/O requirements of its existing PC customers, hence the standard I/O ports on both machines. So on Win8 Microsoft developed reference designs for a low end ARM based Android killer, and a high end Intel based Office compatible tablet for their corporate customers.

Normally Microsoft, Intel, and Nvidia would provide the details of these reference designs to their OEM customers like Dell (NASDAQ:DELL), HP (NYSE:HPQ), ASUS, ACER, Lenovo, and Samsung so they could quickly develop and test compatible versions of their own tablets for Win8. No doubt this is already happening. But at some point (in my opinion very recently), Microsoft decided to go ahead and productize a version of these designs, get them made somewhere in China via their existing XBOX manufacturing infrastructure, and release it on their own. They suddenly announced it last week, and even showed a demo on a prototype of the device. The decision to announce it early was timed to short circuit the coming announcement of a Google tablet, so that all the comparisons would have to be made against both the Apple iPad and Microsoft Surface.

The entire decision to release a Microsoft branded Surface tablet was based on two key strategies:

1) They are attacking Google Android. Although Google has done well with Android on the low end of the market up to now, that is about to change with Win8. With Surface, Microsoft is protecting its corporate base on the high end, while directly attacking Android on the low end. Google now has a very powerful competitor in the ARM tablet space, that also offers the most popular application software out there, Microsoft Office. And this will provide a great excuse for all the tablet OEMs who have failed with Android tablets to give it another try with Microsoft.

2) They are clearly showing Microsoft's OEM partners and corporate customers where they are going with Win8. It will truly be a cross platform ecosystem including the OS, apps, content, and multiple device compatibility and sharing, similar to the Apple ecosystem. And it will address both the traditional PC workflow requirements and the new content consumption space on tablets and phones. Once the Win8 ecosystem is in place in a year or two, Microsoft could even decide to exit the tablet business and leave it to their partners.

The last minute decision to create and announce Surface is a good move for Microsoft. So that leads to the next question, will Microsoft also release a Win8 phone of its own? That is yet to be seen, but I seriously doubt it will happen. Google made one of the biggest blunders ever by buying the Motorola Mobility smartphone business and becoming a direct competitor to their Android phone customers, who are now running away to work with Microsoft for the next generation Win8 phones. Microsoft is already no doubt working on Win8 phone reference designs with Nokia (NYSE:NOK), Samsung, HTC and others, but will not want to threaten these OEMs with being a direct competitor in their most important business segment of smartphones.

Next Google. So what about the Nexus 7? Google has worked with Taiwan computer titan ASUS to produce an excellent tablet implementation at a very good price point of $199, which undercuts Surface (and iPad) by a significant amount, but also provides much better functionality, performance and compatibility than the previous Android tablet favorite, the Kindle Fire from Amazon (NASDAQ:AMZN). Google made a significant move by developing its own new version of Android called version 4.1 Jelly Bean as part of the release. I expect this to continue, with the real battle for the mobile phone and tablet market being the OS wars, with Microsoft Win8 on one side and Google Nexus version of Android on the other. The company which can do the better job of innovation, testing, app developer support, compatibility, ecosystem growth, and OEM partnerships will be the market share winner over the next couple of years.

Source: Google Nexus 7 Vs. Microsoft Surface