Microsoft Surface fuels fear and loathing in PC land

Tough talk about Microsoft's upcoming tablet is the latest sign of a PC industry in panic mode

Back when I was a young construction worker with a big mouth and smallish muscles, I got a bit of advice I've never forgotten: "Don't let your mouth write a check that your butt can't cash." Someone should have told that to JT Wang, CEO of Acer, who mouthed off to Microsoft the other day.

"We have said [to Microsoft] think it over. Think twice," he said in an interview with the Financial Times.

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Wang, of course, was referring to Microsoft's plans to build and sell its own tablet, the yet-to-ship Surface, an unprecedented move that has computer manufacturers wondering how they'll compete with their most important partner. Acer is the fourth-largest shipper of PCs, but launching vague threats against Microsoft is a bit like tossing spitballs at the train that's about to run you over. It's a losing tactic that underlines the panic spreading through the industry.

Microsoft shifts its course with Surface

Microsoft's Surface announcement has been viewed as a tacit admission that the company doesn't believe the OEMs will produce a decent Windows 8-based tablet on their own. If history is any guide, they probably won't. Case in point: Acer, HP, Dell, Asus, and Samsung all tried and failed to produce a tablet that could compete with the iPad, says IDC analyst Bob O'Donnell.

Microsoft knows that, and having made a huge gamble with the radical redesign of Windows, it's taking tablet matters into its own hands. If that upsets the OEMs, it's simply too bad. "They [the OEMs] simply have to live with this. They have no other option," O'Donnell told me.

Microsoft's internal deliberations on this matter are unknown, but the writing is on the wall. The Windows franchise is in trouble, as users increasingly turn away from PCs to today's more powerful tablets and even smartphones. It is, as Apple's ads used to say, time to think different.

Panic in PC land
Not convinced that the PC market is in dire straits? One short paragraph in Gartner's report on the second quarter of this year says it all:

"In the second quarter of 2012, the PC market suffered through its seventh consecutive quarter of flat to single-digit growth," said Mikako Kitagawa, principal analyst at Gartner. "Uncertainties in the economy in various regions, as well as consumers' low interest in PC purchases, were some of the key influencers of slow PC shipment growth. Despite the high expectations for the thin and light notebook segment, Ultrabooks, shipment volume was small and little impact on overall shipment growth."

Microsoft experienced its first-ever loss as a public company last quarter, and though delayed revenue for Windows 8 pushed it into the red, it was still a sobering event. Intel, the other huge pace setter, drove the Ultrabook push, and since that effort has failed to goose sales of PCs, Microsoft was left with little alternative than to make a radical course correction.

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