After Strong Debut, Microsoft Must Find a Way to Distinguish Windows 8 Tablet

by Anthony John Agnello | September 14, 2011 3:41 pm

Attendees at the Microsoft (NASDAQ:MSFT[1]) Build conference literally rushed the floor of the Anaheim Convention Center on Tuesday after the company held its press conference introducing the Windows 8 operating system. The blitz to the show floor wasn’t fueled purely by a desire to get some hands-on time with the latest packed in version of Windows Solitaire, but curiosity about Microsoft’s big gun at the show: Samsung’s Windows 8 tablet PCs.

Build wasn’t the first time the press had demoed the Series 7 Slate, but it was the first time it got an extended experience of Windows 8 running on a tablet, and the reaction has been favorable. “Apple (NASDAQ:AAPL[2]) gave us a glimpse at what a post-PC operating system might look like, and now Microsoft’s gone and pushed that idea to the limit. (We) like what we see,” wrote Christopher Trout[3] at Engadget.

Investors don’t appear to be quite as moved. On Wednesday, Microsoft was trading around $26 at midday after around 30 million shares were exchanged. Put another way, it’s business as usual. CEO Steve Ballmer will hold court at Microsoft’s annual Financial Analyst Meeting before the market closes Wednesday, but it’s unlikely he’ll make any announcements that will cause the stock to see major action. Even after months of speculation as to what Microsoft’s grand plans for the tablet market are, the big reveal hasn’t brought big changes, merely more expectations.

Positive press or not, Microsoft and its manufacturing partners still face what appears to be an unstoppable market force in the form of Apple’s iPad when Windows tablets start selling in the near future. Hewlett-Packard (NYSE:HPQ[4]), Motorola (NYSE:MMI[5]), even MSFT partner Samsung (PINK:SSNLF[6]) — all of them have failed to dent the iPad market. Even with an impressive operating system that can seamlessly blend a user’s experience on a work PC with their tablet, there’s no guarantee that Microsoft and Samsung will be able to penetrate consumer infatuation with Apple’s device.

As discussed in a Tuesday report regarding GameStop‘s (NYSE:GME[7]) tablet plans[8], tablet makers have a shot at finding a place in the one-sided market by specializing in niche audiences. Where GameStop is looking to capture consumers by making tablets for the high-spending, video game-playing crowd, Microsoft has the means to cater to multiple specific audiences.

The company has, of course, done this for years with Windows and its other products like Microsoft Office. Windows Vista, maligned as it was, was smartly released in a number of different editions, some built for enterprises, some for consumers and others, like Windows Vista Starter, custom-made for emerging markets. Office still is offered in packages for businesses and students. If Microsoft can effectively develop and market its Windows tablets to suit a similar range of audiences with different needs, and especially different budgets, it stands a good chance of distinguishing itself from Apple.

How should it separate its different Windows tablets and Windows editions from each other? It’s likely Microsoft will take the same approach it always has, offering certain tablets for professionals, others for students and still more for the average consumer. If it wanted to get cagey, however, Microsoft would try to design its line of Windows tablets to suit different age groups.

Private company LeapFrog Enterprises is releasing a $100 tablet aimed at 4- to 9-year-olds called the LeapPad Explorer. By going for that young a niche, LeapFrog likely will avoid competition with Apple altogether. If Microsoft really wanted to make a dent in the market, a series of aggressively priced tablets aged at children, young adults and even seniors could make it happen. Right now, Microsoft’s Windows 8 tablets are building good momentum, but that won’t be enough to win the market. Ballmer & Co. need to think around their competition, not like them.

As of this writing, Anthony John Agnello did not own a position in any of the stocks named here. Follow him on Twitter at @ajohnagnello[9] and become a fan of InvestorPlace on Facebook[10].

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