Opinion: Microsoft should make its own Windows 8 PCs

Nicole Kobie says Microsoft could reverse the slide in the PC market by making them itself

3 Jan 2012

The PC world is stumbling, and if it falls it’s going to bring Microsoft tumbling down with it. But there’s a solution: it’s time for Microsoft to start making PCs.

The tech world is moving towards tablets and apps, and that could cause trouble for Microsoft in the long run. At the moment, more than nine in ten computers run Windows, but sales of PCs are essentially flat, while sales of smartphones, tablets and Macs are skyrocketing, posting growth well above traditional PCs for 22 consecutive quarters.

That all adds up to a stagnating market for Microsoft’s core software business, and it’s already starting to show, with its latest round of results showing weak PC sales were hurting Windows. Microsoft must do something.

Microsoft stated at the launch of Windows 8 that every device should have a touchscreen – what better way to push that vision than to make touch laptops and all-in-ones itself?

Intel already is. After failing to convince tablet and smartphone makers to use its Atom chips, Intel doled out $300 million to encourage manufacturers to create Ultrabooks – essentially, a PC version of Apple’s MacBook Air – to draw consumer attention away from the Apple Store. PCs have become commoditised appliances, and nobody lines up to buy toasters (until Apple releases the iToast, that is).

While cheap, boring PCs certainly have their place, their tight profit margins mean that manufacturers also need to compete at the high-end of the market to remain in the black. And who better to do that than Microsoft?

While starting a PC business might seem insane given the state of the market, Microsoft isn’t starting from scratch. It already has a hugely successful PC hardware business in the form of the Xbox – which is a PC in all but name. Yes, there were “red ring of death” issues early on, but that bit of hardware has helped the entertainment division contribute $9 billion in quarterly revenue, and proves the public will happily buy made-by-Microsoft kit.

If Microsoft can’t ramp up its own manufacturing plant, it doesn’t have to. Microsoft’s latest round of results show it’s sitting on a $57 billion mountain of cash. It could easily buy a PC maker; it might even be enough to tempt HP to change its mind about selling its PC business.

Regardless of how it’s made, a Microsoft PC has the potential to anger existing partners. But what’s Dell or Asus going to do: start running Ubuntu instead? Lovely as the Linux OS has become, OEMs are as locked into Windows as they’ve ever been. As long as Microsoft plays nicely with licensing fees, there’s no reason why they should lose out – quite the opposite if it drives consumer spending back to the PC market.

The vertical integration that works for Apple may not work for Microsoft, but it’s worth noting that Google certainly looks keen to follow the Mac-maker’s lead. First, there’s Google’s surprise purchase of Motorola, giving the web firm its own smartphones and tablets. And while its Chromebooks are made by Samsung and Acer, they are heavily Google-branded, and are being pitched to consumers in “Chromezone” pop-up shops, the first of which set up in a PC World around the corner from PC Pro’s offices.

Perhaps surprisingly, given the move to online shopping, retail stores are critical to Apple’s success. According to a retail report, Apple Stores are some of the most successful retail premises in the US, selling $5,626 per square foot annually – more than posh jewellers Tiffany & Co. Microsoft stores already exist; it’s time they had a bit more on the shelves.

Plus, as Microsoft stated at the launch of Windows 8, it believes every device should have a touchscreen – what better way to push that vision than to make touch laptops and all-in-ones itself? Apple defined the tablet market with the iPad; Microsoft could very well do the same with touch PCs.

This year's arrival of Windows 8 gives Microsoft the perfect opportunity to break into the hardware market. Instead of unveiling the new OS on a Dell, Asus or Acer, imagine if Microsoft unveiled the new OS perfectly optimised on its own slick Ultrabook, tablet or all-in-one PC. Is it too fantastic to picture people queuing around the corner to get into the Microsoft Store?

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