Steve Ballmer talks about building new hardware and experiences in letter to shareholders

In his latest letter to shareholders, Steve Ballmer has reiterated the desires of the company to become a devices and services company, contradicting what Charlie Kindel, former Windows Phone General Manager, had to say about the hardware dream with the Surface.

With the coming release of Windows 8 and the subsequent decision for Microsoft to dive in and develop its own tablet, it’s becoming clearer where this is taking them. A company that makes and delivers the entire stack. From cloud services to the device in your hand, this appears to be their vision.

Of course, Microsoft is no stranger to producing hardware but unlike mp3 players (opens in new tab), consoles (opens in new tab) and peripherals they haven’t ventured this far into computing devices before. The Surface tablet represents a radical departure for Microsoft and some clues to the gravity of this can be ascertained in the following quote:

"To best understand what we are about to deliver and what we're building toward, it's important to recognize a fundamental shift underway in our business and the areas of technology that we believe will drive the greatest opportunity in the future." 

That’s a bold statement, the most important part being the fundamental shift in what technologies that will drive the biggest opportunity. Aside from their conventional business of Windows and Office, Microsoft are fully engaged in the cloud and building some amazing consumer experiences there but the other direction they are moving closer to is to devices. During his statement, he refers to Devices and Services no fewer than seven times, staying firmly on message throughout.

Whilst this letter makes sure to mention the close relationship with partners, there exists a heavy trend for how they will be doing things going forward. The emphasis on making their own hardware to complement their services is pretty clear (following quotes from Ballmer).

"There will be times when we build specific devices for specific purposes, as we have chosen to do with Xbox and the recently announced Microsoft Surface. In all our work with partners and on our own devices, we will focus relentlessly on delivering delightful, seamless experiences across hardware, software and services. "

It is clear how proud Microsoft is of their Surface concept and how well that will highlight the coming Windows 8. In describing the coming Windows 8 devices, could Steven be describing anything other than their own tablet? If he is, he’s certainly not referring to anything other than the WinRT devices they have worked closely with key OEMs to produce.

“Windows 8 will come to market Oct. 26, 2012, with beautiful hardware that will light up with our consumer cloud services. Windows 8 unites the light, thin and fun aspects of a tablet with the power of a PC.”

Not going it alone just yet..

It’s easy to see why Microsoft wants to shift its focus to hardware and software, they have struggled for years to get OEMs to stop putting 'crapware' on their machines. They have stores now, albeit in the US at present but that will, in itself drive them to produce stock to market and promote within the four walls. They have Xbox devices and the coming tablet but there is one device missing, a phone. We have heard firmly that MS are developing a device, it’s a rumor as old as the hills, if they only plan on selling such a device in their own stores then that alone makes some sense. It's only in its own store, with its own product that Microsoft can offer its clients that true end to end service.

Their key goals of interest here:

  • Developing new form factors that have increasingly natural ways to use them including touch, gestures and speech.
  • Firmly establishing one platform, Windows, across the PC, tablet, phone, server and cloud to drive a thriving ecosystem of developers, unify the cross-device user experience, and increase agility when bringing new advancements to market.
  • Making technology more intuitive and able to act on our behalf instead of at our command with machine learning.

Microsoft is in the midst of some radical transformation, devices and consumer focus will likely lead the charge by shaping the coming offerings from the software giant. Next year will likely see a new Xbox and with it a stronger push for that living room, not just games but as a general purpose content device. Microsoft have great partners producing Windows Phone but can a company that tags itself “devices and services” not offer the full range of devices to show of their software and service?

Do you think Microsoft has what it takes to deliver on becoming a devices and services company? Would you like to see Apple style shops going global? Should they make a Windows Phone?

Source: Microsoft (opens in new tab)

  • Looking forward!!! Optimize your software with your hardware! That's the way to go! Bring us more great gadgets!
  • If they keep unveiling their new OSes like they do now, they will never catch Apple. They need to learn how to do keynotes first.
  • Very true they need to make it special and different like Apple does and like they do with Xbox on E3
  • So in order to be special and different they need to be like Apple? Makes perfect sense!
  • I think he means they need to find their niche
  • The guy also says "like they do with Xbox", talking about what Microsoft already does for Xbox.
  • Every MS product I've ever owned was top notch. I look forward to this. Rival other companies and continue to innovate.
  • It used to be (and still is, to an extent) that if you want a windows machine without any bloat, you've got to build it yourself.  In the mobile devices arena, DIY is not an option.  So this is great news for windows enthusiasts.
  • Well, if wp8 is like wp7 it won't have any bloat.
  • I was speaking of Windows (surface tablet), not Windows Phone.  Bloat is obviously not a serious problem on WP as the OS is locked down.  However, carriers can still throw their crap apps on it.
  • Forget what I deleted.
  • The great thing about Microsoft stores is that they sell "Microsoft Signature" PCs. What that means is that they take OEM PCs and install a fresh OS so that there isn't bloatware and it's ready to go out of the box.
  • As much as I've anxiously been waiting for the Nokia 920, the complete openness of Microsoft's efforts to transition to devices in addition to software and services, will incite me to wait for a windows phone straight from MS before upgrading.
  • I'm sure Microsoft's offering would be a nice device, but I'm not sure it would exceed the level of hardware innovation found in the L920.  It would probably be nicer device than the HTC or Samsung offerings, though.  Plus, part of what makes Nokia's phone so enticing are the Nokia-exclusive apps, many of which are quite impressive.  I don't see Microsoft creating a unique software experience for their Surface phone.
    If I were a Verizon customer (which I'm not) and determined not to switch to AT&T, then I'd probably wait for the Surface phone.  But seeing as I'm already with AT&T, the L920 is a lock for me.
  • A company who gave Nokia money to have WP7, yea I really doubt that they can't innovate more. Cash leads to r&d, r&d leads to more innovation. Look at surface, a true innovation.
  • This new direction certainly sounds exciting, but keep in mind that MS doesn't have anywhere near the amount of experience building phones that Nokia does. I'll get a 920 this time, and give MS a couple.of years to get good at it. HP learned the hard way that phones aren't as easy as laptops.
  • "but keep in mind that MS doesn't have anywhere near the amount of experience building phones that Nokia does". And that reminds me of how I viewed Apple when they announced iPhone press.
  • Nice.
  • But Apple had year of experience witht ipod. The first Iphone was a crappy phone. It had poor reception and audio quality. However, it was a good media player. When they added the app store, it became a great media player. The iphone only became a good phone recently when they improved the reception and audio quality.
  • IMHO iPhone was rather crap in the first two iterations - it only got decent by the time of 3GS.
  • I do like this, consumers benefit as end result.
  • Definitely!
  • Things are different now. OEMs are why the MS OS was successful in the past.  Apple was stubborn and kept it proprietary. The tablet/phone world is so much different than the PC world.  Tablets and phones aren't customizable on a hardware level so having full conrol has it's advantages now.  You can only get an IPad from Apple. MS needs to cut off OEMs when it comes to tablets and phones if they want to be a devices company.  Apple doesn't have to compete with anyone. If someone wants an IOS based tablet, they have one choice and apple gets all sales.  If someone wants a Windows 8 tablet, they have MS, HP, Lenovo and who ever else is going to make one. MS will get profits from the OS, but their hardware sales will be divided.  I just don't think, with every OEM out there making hardware, that they will sell enough direct, to make it profitable.
  • OTOH, Microsoft stepping into the hardware game sets a new standard for all the other OEMs to rise up to. For one thing, I have a feeling the amount of resource-hogging, performance-sucking bloatware is going to go down, because Microsoft will have little to none of it on their computers.
  • I built my rig from scratch, so every time I wipe the primary hard drive and reinstall windows I notice it's really fast and then starts to slow down once I begin loading all the programs, do this to all my laptops that I get too. I can't imagine using the oem software on a factory built computer and it being fast. I feel like an MS device should be fast because it's optimized.
  • This is precisely why I'm buying from Microsoft instead of some other OEM. I'm sick of crapware, and as long as OEMs force it down our throats, I won't be buying from them. OEMs do need to learn this lesson.
  • If you make the best product on the platform and the price is similar, you will get most of the profit. Samsung get something like 90% of the android profits because it make they put features they can market and the price of the phone is basically the same as the other top phones. With computers and laptops, you had many price points and different build quality. People usually just a computer with ok build quality that cost the least. Because of carrier subsidies, the cost of phones is not a deciding factor. Tehy usually cost $200 on contract. Tablets also seem to be very close in price. If cost is not an issue, you will choose the best made device.
  • I'm getting the phone MS designs themselves when it comes out. I am currently locked into a contract with my L900 on ATT anyway, as much as I want a lumia 920, I will be patient and wait to see what MS has to offer I guess around December or Jan '13????
  • Its gonna be at least q2 of 2013, so I would get the first wave of WP 8 if I were you.
  • Can't wait for the Surface Phone so next month I'm getting the 920, and maybe the 8X too, then, and only then, can I patiently wait for what MS has to offer.
  • Yes, yes, a million times yes!!
  • Skip your meds today?
  • I am liking my L900 and will pick up the Cyan 920 whenever available. If and when MS releases one will pick it up too. I just want a few great games to come. Then this will be the perfect platform for me
  • I will buy into, just please make an LTE Verizon phone with global GSM capability. I am anxiously waiting for both Suface tablets.
  • I think that this is a very smart decision on Microsoft's part. I for one am looking forward to their products. All of them so far have been beautiful and top notch. (except the rrod). But I forgive them for that
  • Microsoft has been wise to stay out of the PC hardware business up to this point.  Hardware is hard.  Hard to build, hard to support, hard to make a profit from.  They've dipped their toes in the water to this point.  It will be interesting to see what happens as they start to wade in.  That is some cold water with many unpleasant things lurking under the surface.
    (Not that software is easy, haha!  But at least there's money in it.)
  • Wish they could sell their exclusive devices through amazon as well. Or ateast sell it on Microsoft store website.
  • Now that would be awesome. I would love a Surface Phone if it offers everything in the concept I saw and reposted.
  • I think it's a great idea depending on how fast wp8 starts growing. If they do make one I would support it.
  • im in for the Surface phone
  • heres a thought...maybe Microsoft realizes that the current and future generations of Windows devices are consumer devices, and in order to finally put that "nail in the coffin" to RIM, they need to make an Enterprise-friendly device?  A no-frills, no bells and whistles platform that talks nativly to Exchange, SharePoint, SkySdrive and Lync....finally makes Blackberry become irelevant in the business world?  The Nokia, HTC & Samsung devices are niche devices with their dedicatred apps and hardware independance.  I see MS getting in to the phone mfr game as a purly 100% Business play.  If you want one for consumer use, im sure they will sell it to you, but i cant imagine these devices woudl rival the camera of the Lumia, the pixel density of the HTC or batter life of the ATIV.
  • Robert, I think you are correct to note the earlier comment of Charlie Kindel. His take on where the company is going is probably at least part of the reason why he is now the FORMER general manager of Windows Phones, When company's make big strategic shifts, the boss wants everyone on board and fully supportive. I always thought the idea that Microsoft was building the Surface to show OEM's what could be done in hardware design was probably NOT the reason they decided to build them. The OEM's do know how to build hardware, but they've gotten trapped in the race to the bottom on price. Some have tried on their own to break free (HP with its Envy line for example). Surface is more about telling business and consumers that the world of PC's have changed, but that you don't need a tablet AND a PC to get work done (that is another one of the company's messages after all) and we are so certain of that we've built software and hardware to show you.  Here is the one consumer device you need (RT) or here is the one work device you need (Pro).
    Surface is sending a message, but not to OEM's, the message is to consumers and the enterprise that things have changed.
  • I'm pretty sure I heard this before.......his name started with a B and ended in tes.  Thank god Ballmer finally sees the light.    and OMG couple more weeks till surface!!!!!!!!!!! so excited.
  • Same as Google now they are trying to become devices and services company through buying the Motorola.
    Both of them (Microsoft+Google) are following Apple in providing equipments and services to the end-users.
  • Their not following their innovating
  • They're changing their DNA actually. Bill Gates and Microsoft have always denounced an end to end user experience, which was Steve Jobs' thing. Didn't work for the Mac or NeXT, but wonderfully for iOS.
    Anyway, this is a big deal.
  • i predict by this time next year we'll also see a ms branded aio pc
  • The only way MS can insure their future survival is to go into hardware because each and every one of their OEMs can desert them anytime, including Nokia.
  • I would like to see a Surface tablet with a better screen resolution.  When I look at a picture I want it to be like you are there.
  • Funny how people say Microsoft is following when they actually lead with Microsoft Store's long ago. Microsoft's first stores failed because they never developed their offerings, so this is NOT a new copy cat effort.                                                                                                                           Apple fanboys FAIL to realize that the real "King of iCopy" is in fact Apple. Steve Jobs and crew merely copied Sony's great phone and walkman designs. How soon iSheep punks fail on electronic history exams.... Get it right Apple fanboyz.... Sony lead the way with the Walkman and Steve "the Thief" Jobs merely copied Sony designs.  
  • Why not?  Worked for Apple.
    I only hope they deisgn it better than they did the MPC workstations.  The hospital I work at bought a lot of them and nearly every one of them failed.  Mainly power supply issues, but these were workstations that you would expect to be able to be used heavily.