Microsoft (NASDAQ:MSFT) has made serious strategic miscalculations during the past five years. The plan to date: Show up to the party fashionably late, then make a grand entrance while the rest of the technology industry stands and applauds. That was how the company approached the current smartphone market.
Apple‘s (NASDAQ:AAPL) iPhone grew into the market tidal wave it is now from 2008 to 2010 while Google (NASDAQ:GOOG) spread its Android operating system through an industry of manufacturers ready to release their own Internet-ready, touchscreen devices. At the same time, Research In Motion (NASDAQ:RIMM) and Nokia (NYSE:NOK) started to watch their mobile empires decline. Microsoft, watching its own Windows Mobile 6 flounder in this smartphone ecosystem, sat back and waited. Then Windows Phone 7 devices hit the market at the end of 2010 and no one cared. The company wasn’t fashionably late — just late. The question for investors now: Is Microsoft repeating history with its tablet plans?
A Thursday report in the Korea Economic Daily cited an industry source that claimed Microsoft finally is ready to reveal its plans for the tablet market at the company’s BUILD Developer’s Conference sometime between Sept. 13 and 16. Windows 8 — the next iteration of the company’s ever-present operating system designed to operate smoothly on both home PCs and mobile devices alike — will be the centerpiece of the company’s tablet initiative. The manufacturer Microsoft is bringing as its first date to the tablet party is none other than Samsung (PINK:SSNLF), which was, as canny investors might recall, the first company to release a major Google Android tablet to retail in 2010.
Of course, Samsung’s tablet business has been struggling with more than just the popularity of Apple’s iPad. Apple has targeted Samsung’s entire mobile business with lawsuits around the world, claiming that both Galaxy smartphones and tablets infringe on patents held by the Cupertino, Calif.-based company. So far, Apple has moved to block Samsung from selling its current tablets in not just the United States but Australia, Japan and most western European countries.
Microsoft then represents a marvelous opportunity for Samsung to realign its prospects in the tablet market — teaming with a $217 billion technology company that controls its own library of precious technology patents (hopefully enough to hold off more infringement) should provide a more stable presence in the tablet market.
How does teaming with Samsung help Microsoft, though? When Samsung released the original Galaxy Tab at the end of 2010, it reportedly sold around 2 million tablets — a fraction of Apple’s iPad sales, but not a terrible showing. Early this year, word came out that many of those Galaxy Tabs were being returned, and retailers couldn’t unload purchased stock. Now with the Galaxy Tab 10.1 — Samsung’s second major entry into the market — being blocked from sale in many places, it’s hard to gauge what kind of power the brand will give Microsoft’s tablet efforts.
The burden of pulling consumers away from Apple’s iPad then falls to Steve Ballmer’s International House of Windows. Without knowing just what Windows 8 will be able to do to differentiate itself from other mobile offerings, its tough to say whether it can find an audience through features alone. Solid apps and decent technology haven’t helped Hewlett-Packard (NYSE:HPQ), RIM or Motorola (NYSE:MMI) find success in the tablet market. In fact, at this point, low prices seem to be the only way to really find tablet buyers not interested in an iPad. Unless Microsoft and Samsung’s fancy new device can significantly undercut the iPad while matching or surpassing its feature set, being late to the party will be the least of Microsoft’s worries.
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 and become a fan of InvestorPlace on Facebook.
