Microsoft: Shifting to ‘devices and services’

There’s a new hardware player in town, but it has a familiar name: Microsoft.

The software king has taken a hard look at itself and refocused its efforts on what it calls “devices and services” to kick off a new company chapter.

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The decision was announced in a letter to shareholders from Microsoft chief executive Steve Ballmer. He called the move a “significant shift” that affects every part of the company.

The letter codifies a strategy Microsoft has been headed toward for a while, pulling a page out of Apple’s playbook.

It was clear that Microsoft was moving toward producing its own devices when it announced the release of its Windows 8 Surface tablet, a move said to unsettle its many manufacturing partners.

Heading off some of those concerns, Ballmer said in the letter that the company will continue to “work with a vast ecosystem of partners” on Windows PCs, tablets and phones. But, he added that the company, on occasion, will also build “specific devices for specific purposes,” as it did with the Xbox gaming console and the Surface.

The company has a spotty history when it comes to hardware. It’s seen unqualified success with the Xbox and its accompanying platform, but watched its Kin mobile phones and Zune music player lose out in a big way to Apple’s devices. The Surface — which comes with a keyboard cover and is supposed to have full PC capabilities — has a lot of potential and could challenge the iPad in the growing business market. As Microsoft has yet to announce a price for the tablet, however, it’s hard to say how the device will compete.

It should be noted that Microsoft isn’t completely abandoning its software roots, Ballmer said, but is looking at its software in a new way.

For example, he noted, the company’s upcoming launch of its new operating system, Windows 8, will debut with devices that highlight the best of what the software has to offer.

Ballmer’s letter was upbeat, saying that the company will be working hard to develop new devices that integrate touch, gestures and speech controls and will establish a single platform across PCs, tablets and phones.

“It is truly a new era at Microsoft,” Ballmer said. “Although we still have a lot of hard work ahead, our products are generating excitement.”

Despite Ballmer’s optimism, investors seemed a bit uneasy with the announcement. Microsoft opened at $29.15, down from a previous close of $29.28. In mid-morning trading, the stock was priced at $29.17 per share.

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