Microsoft: Beneath The Surface

Summary

• Last week’s Surface event showed a newly-assertive Microsoft in the hardware space.
• Chief among the announcements were the ARM-based Surface Pro X, and two foldables not available for a year.
• Microsoft announces a phone running Google’s Android operating system and my head explodes.
• I remain skeptical of the hybrid category, but Microsoft and Apple are not. They might be smarter than me.
• These announcements cut a wide swath across the tech landscape, affecting Apple, Qualcomm, ARM, Intel, AMD, Google, and Windows laptop OEMs.

Microsoft has been at this for a while now. Kajac123

A Long Road

That picture up there is a 1996 "palmtop" PC running Windows CE 1.0 mobile. It was the beginning of a long road for Microsoft (NASDAQ:MSFT). Ericsson (ERIC) had a version of the successor model, the 400LX, that had a wired connection your Ericsson mobile phone for internet speeds of up to 9.6 kbits/second, a million times slower than 5G. It was like living in the future, except much, much worse.

That eventually morphed into Windows Mobile, Windows Phone, and Windows 10 Mobile. All failures. Over 20 years later and they don't have a smartphone, or a third party successfully running their OS on a smartphone.

But Microsoft has been nothing if not patient here as their number of failed mobile OSes, now at four, attests to. Moreover, it's not just the OSes - Microsoft has had trouble making mobile hardware, starting with the Zune.

From Triumph of the Nerds.

Their problem in the pre-Satya Nadella days was they were so focused on their Windows and Office near-monopolies, they could never make a great product that just stood out on its own. It could never survive the Hunger Games that was Microsoft internal politics in those days - the purpose of everything had to be to feed the Windows/Office beast. If you notice, the HP 300XL pictured above had "pocket" versions of Word and Excel. The point of these devices to Microsoft was to extend the Windows and Office monopolies, not make great devices. And, as Steve Jobs pointed out, they had no taste.

But the Surface has changed that. It is hardly a blockbuster product, but it is a new form factor, and Microsoft has been able to get some momentum in FY 2018-2019 here, and actually make Apple follow them

Analyst’s Disclosure: I am/we are long AAPL. 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.