Microsoft aims to straddle two worlds with new Surface tablet

Microsoft’s lumbering crawl into mobile technology had many writing off the titan of computer software as a has-been.

But after unveiling its first tablet, called the Surface, some analysts advise not to count the company out just yet.

Several years behind its Silicon Valley rivals, Microsoft is betting it can play catch-up on tablets and smartphones by leveraging its dominance in the workplace and its success in the living room.

Just imagine Microsoft offering its Office software exclusively on the Surface while providing access to Xbox games and videos. It could be the right mix of professional and personal elements — a combination that Apple and Google haven’t been able to achieve fully. Then add the other online assets Microsoft has amassed over the years: the videoconferencing service Skype, the professional social network Yammer and the search engine Bing.

The potential is great, analysts say. That is, if the notoriously bureaucratic tech giant doesn’t end up repeating its past mistakes.

“Microsoft has had all the pieces for a consumer strategy for years, and they’ve totally and utterly failed time and time again,” said Michael Gartenberg, an analyst at Gartner research. Standout failures include Microsoft’s Zune music player and the Kin smartphone, which were panned by critics and fed the reputation of a company that was out of touch with consumers.

“The trick is if they can tie it all together into a compelling story and get consumers to buy into a whole ecosystem of devices and apps, which is what Apple has done so well and Google has done well, too,” Gartenberg said.

On Tuesday, Microsoft’s stock shot up by nearly 3 percent, though the shares are about half the value of their high reached in December 1999.

When it comes to tablets, Microsoft hopes office workers will want the Surface’s keyboard and stylus to produce Excel spreadsheets or PowerPoint presen­tations and then take the gadget home to watch movies. Microsoft on Wednesday is expected to roll out at least one new Windows 8 smartphone that will add to its mobile ecosystem.

Microsoft’s Office suite of apps has a stranglehold on businesses. It’s also gained a foothold in households with its Xbox Live, which has 40 million subscribers. The service charges customers a fee to play games online and watch streaming videos through their game console, which has sold 66 million units.

When it announced the Surface in Los Angeles on Monday night, chief executive Steve Ballmer said the device will straddle the tablet and PC worlds. The higher-end Surface will run the full version of Windows 8.

“No compromises,” Ballmer said. Microsoft didn’t announce a price or shipment date.

Apple, in contrast, appears to have drawn a brighter line between its tablet and Mac notebook, which for now run different operating systems, analysts said.

Microsoft’s move was prompted by the iPad’s runaway success. Tablet sales are expected to skyrocket 54 percent, to 107 million units this year, according to research firm IDC. In 2016, consumers will buy 221 million tablets, IDC said this week.

Tablets are stealing away laptops and computer owners and even beginning to win over some businesses. This year, PC sales are expected to rise just 5 percent, to 383 million units, compared with 10 percent growth the previous year.

Microsoft has struggled to keep an entrepreneurial edge given these sea changes in the computing world, experts say.

When Ballmer took over day-to-day operations from Bill Gates in 2000, he tried to thin out a bloated management structure. But engineers and marketing teams often worked in different buildings and traveled by shuttle bus across the vast Redmond, Wash., campus for meetings.

The move to develop its own hardware device also risks alienating key partners who have helped put the Windows software in the vast majority of households and businesses around the world.

“They have very little slack to make this new strategy relevant to everyone,” said Al Hilwa, an analyst at IDC. “Microsoft is trying to give you multiple access points to their ecosystem of content and apps, which is what Apple has done very well and Google is doing, too. It will be a race of giants.”

Cecilia Kang is a staff writer covering the business of media and entertainment.
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