Microsoft Takes Tablets One Step Closer to Commoditization

One of the interesting things about Microsoft is that, for all of its talent at producing software, its biggest success as a hardware manufacturer has come by selling its hardware at a loss. In the video game console market that's part of how the game is played - you sell the console to lock players into your game system (and, ideally, also the successor).

Now, it seems, Microsoft is entering the tablet market as a manufacturer. You can call it smart, you can call it desperation, but it does appear that Microsoft has little chance of establishing a significant foothold in the tablet market without either making its own tablets or subsidizing third party manufacturers (directly, by giving them money, or indirectly, by creating a context in which they will profit through the sales of products and advertising on the units they manufacture). If it's impossible for third parties to turn a sufficient profit on Windows tablets, they'll drop Windows in favor of Android.

Microsoft has fallen far behind Google and Apple in the mobile OS market. I am not sure that becoming a manufacturer will be enough. But if Microsoft doesn't get its mobile platform into the hands of consumers, the number of consumers who are not invested in a competitor's platform - who either don't have a modern mobile device or are willing to dump their Apple or Android products, and all the apps that go along with them, in order to switch to Microsoft - will become vanishingly small.

I suspect that Microsoft, like Amazon, will ultimately make its tablets a loss leader for its sale of electronic media. Apple is enjoying its present profits, but it is aware that the long-term picture involves commoditization - little to no profit on the actual mobile device, with profits instead derived from the sale of software and media. Still, there's no guarantee that it will be an easy transition. Apple has two significant advantages over Microsoft - proven hardware, and a proven ability to sell apps and media. What a role reversal....