I know what you're thinking. Microsoft's (NASDAQ:MSFT) launch of Windows 8 is too little, too late to save the foundering PC market. The Surface tablet can't compete with the iPad. Windows Phone's market share is so small you need a microscope to find it. And taken on a case by case basis, all of these statements are absolutely true.
But the thing is, all of these arguments about why Microsoft is doomed to failure completely miss the point of what Microsoft is trying to do. I can't believe I'm about to type this sentence, but for the first time in a long time, Microsoft is ahead of the curve.
The Post-PC World
Look around you, and ask yourself, "who needs a PC?" I can make a very short list of people who actually need the raw computing power that only a stationary tower can provide -- high speed traders, hardcore gamers, Pixar animators... and that's about it. For the rest of us, a laptop, tablet, and smartphone can fulfill all of our computing desires. And in the not-so-distant future, even the laptop will be relegated to the likes of those few who need a physical keyboard to do a lot of typing. Since we keep getting better at cramming more processing power into smaller spaces and touchscreens have made the mouse a quaint antique, in a few years, all everyone else will need to get by will be a tablet and a smartphone.
And it's this future that Microsoft has positioned itself to take advantage of.
Windows 8 is not a desperate attempt to reinvigorate the PC market. Anyone who tells you that can't mentally disassociate "Windows" from "PC." Look at it's UI:
Those tiles aren't meant for clicking with a mouse. They're far too big -- and take up too much screen space -- to only serve that purpose. But scaled to a larger screen, they're the perfect size and shape to be touched with a finger. Above all else, the layout of Windows 8's tiles tips Microsoft's hand. It hasn't tried to reinvent the PC's operating system. It's invented its own tablet operating system. And it's even selling its own tablet to show it off.
The Surface Doesn't Need To Beat The iPad
It's no coincidence that the launch of Windows 8 and the launch of the Surface are so closely linked. With that said, I don't think the Surface can directly compete with the iPad. But then again, I don't think it needs to for Microsoft to succeed.
Shockingly enough, Microsoft beat Apple (NASDAQ:AAPL) to market with a problem-solving innovation: Surface's magnetically attachable keyboard/cover. It solves the problem of typing on a tablet, and gives the Surface instant appeal to a whole new demographic of consumers -- people who want to do some serious work on the go.
Rather than carrying around a laptop and a tablet, frequent flyers and the like need only take their Surface (or Ultrabook for that matter, since its reversible keyboard is another solution to the same problem) to enjoy the benefits of both devices.
And since a majority of companies already have a Windows-based infrastructure in place, it's no small leap to imagine that large amounts of the devices will be purchased with corporate funds to increase productivity while avoiding the hassle of integrating iOS-based iPads into the system. Surface isn't trying to convert the Apple faithful. It's trying to beat Apple to a more work-centric customer.
But even if I'm wrong, and the Surface only sells 17 units between now and forever, Microsoft doesn't need it to be the tablet that brings Windows 8 to the masses. Don't forget, Microsoft isn't Apple. It doesn't need to be the company that makes "the next big thing." It just needs to be the company that does get people to use Windows 8. As long as someone makes a tablet that can either steal market share from Apple or open up a new market, if it runs on Windows 8, Microsoft profits. And once it gets its foot in the door with one device, it's only a step away from selling you its entire ecosystem.
Microsoft Does What Droid Doesn't
The final link in the home computing chain is the ubiquitous smartphone, and admittedly, it's here that Microsoft faces its steepest challenge.
Windows Phone is not new, and so far it's been about as successful as the Zune. And although I don't foresee millions of iPhone users suddenly switching allegiance in a moment of clarity and stampeding to the nearest Microsoft Store, I do think the platform has potential in the future. But only if Windows 8 takes off first.
Why? Because people don't want to have to think about how to get their files from their computer, to their tablet, to their phone. They want it to happen automatically, seamlessly, and without even knowing it happened. And they don't want to have to learn how to use a new operating system with each new device they've incorporate into the chain.
Apple understood this before anyone else, and it's a big factor in the company's recent domination. And just like iOS is almost identical between the tablet and the phone, Windows 8 and Windows Phone 8 have the same look, touch, taste, and feel.
If Microsoft learns from Apple here, it has a chance to steal a big chunk of smartphone users from Google (NASDAQ:GOOG). There is no Droid operating system for a home computer or laptop, and Google's tablets can't shake a stick at Apple's -- or at least its sales can't. Microsoft has a chance to complete the technology trifecta that Apple pioneered when it debuted the iPad -- home computer, tablet, and phone all running the same OS, sharing information and files behind the scenes and creating the user-friendly ecosystem we all so deeply crave. But most importantly, this is something that Google can't do. In only really operates in two of those three spaces, and should Google decide to make the infant Chrome OS the third leg of its tripod, it has a lot farther to go than Windows 8 does.
But What About The Apps?
And now we've come to the elephant in the room. For all of the advantages that Microsoft has created with its new products, it's done shockingly little to address its biggest disadvantage. In order for Windows 8-powered tablets and phones to appeal to a large customer base, they need to have all the same apps that are so easily found in the Droid and Apple app stores -- and that currently aren't in the Windows version.
The problem will solve itself if app developers see a big enough market to motivate them to write apps for Windows 8. But something needs to kickstart the cycle and convince consumers to roll the dice on devices that -- *gasp* -- may not be able to run the next big social game.
That something will certainly not be fanatical devotion to Microsoft and its products, and its biggest potential advantage -- undercutting Apple's hefty price tags -- appears to be woefully neglected by the company.
Surface isn't priced low enough to make a difference. Its entry level is $500, and the awesome keyboard/cover that really sets it apart from the competition costs extra, placing it too close to the price of an entry level iPad. The iPad mini further complicates this by undercutting even the cheapest Surface. The Nexus 7 and Kindle beat even that.
Windows Phones are cheap compared to their competition, but that's mainly because no one wants them. Yet.
Windows computers and laptops are cheaper than their Mac counterparts, but I suspect that a lot of people will be more than happy to run Windows 7 and mismatch their tablet and phone for a few more years. The perfect ecosystem is the kind of thing you don't realize you want until you have it. Of course, then you can't live without it.
And this is why I feel that going long Microsoft is a bold play. If the stars align and something starts the virtuous cycle of demand for Windows 8-based products, then Microsoft stands positioned to repeat its 1990s performance and steal the market that Apple created -- a performance it could only pull off because it was so much cheaper and more versatile than its competition.
Unfortunately, Microsoft doesn't quite seem to have a handle on it yet, and in all likelihood this push will have to come from a third party that makes a highly desirable -- and cheap -- device that coincidentally runs Windows 8. If this happens though, Microsoft's stock can take off like Apple's and Google's have in the past few years.
But if people don't start buying into Windows 8 soon, Microsoft may find the post-PC world running just fine without it, and having to explain a lot of earnings and revenue misses to its shareholders.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in MSFT over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.