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Microsoft's Surface Book to reignite OEM hostility

Gregg Keizer | Oct. 9, 2015
'If I'm an OEM, I’m not happy,' says analyst about Redmond's entry into notebook space.

Microsoft continues to walk that line. "Surface devices face competition from Apple, as well as other computer, tablet, and hardware manufacturers, many of which are also current or potential partners and customers," the company pointed out in a July filing with the SEC.

But the tension between Redmond and OEMs eventually leveled off. "Everything settles out at some point," said Stephen Baker of the NPD Group. "You either make peace or go to war."

OEMs and Microsoft did not kick off a hot war, so peace it is.

But the Surface Book will reignite the skirmishing, even if in the end a truce is declared.

"There are clearly a lot of strange bedfellows in the business," Baker said. "Microsoft seems to want to be the premium Windows device maker, but that skims a lot of value off the top. And at the same time, Microsoft is enabling the lower-class devices, and letting the OEMs fight it out among themselves for the mass market."

Ultimately, however, the OEMs will have to accept Microsoft's newest encroachment. Several of the analysts pointed out that for OEMs, there is no alternative because there's no viable surrogate for Windows. "What are their options? Google's Chrome OS is not at the place yet, not ready to compete directly with Windows or OS X," said Ryan Reith of IDC.

In the months after Microsoft stepped into the personal computer business three years ago, many OEMs introduced Chromebooks powered by Google's OS. But while those devices have sold well in the educational market, they have by no means materially downgraded Windows' importance.

In the meantime, OEMs will stew. "I think there have to be some upset boardrooms over this," Reith said, referring to OEMs.

Microsoft's stated purpose, of course, is not to upset its partners, which it needs more than the revenue -- realized or potential -- the Surface line brings. But its message to OEMs was clear to the analysts.

"This is what we think the industry needs," said Reith of Microsoft's thinking. "No one else is selling something like [the Surface Book], so we're going to do it."

Dawson agreed. "It feels like they're saying, 'The current notebooks are not lustworthy, so we have to create one,'" Dawson said. "In that sense, Microsoft feels that Windows OEMs are not getting the job done. That's an indictment, and none of the OEMs will be happy about that."

Most unhappy, Baker opined, will be what he described as the mid-tier Windows OEMs, like Acer, Asus and Toshiba. "It put a lot of pressure on them," Baker said. "The bigger guys like HP, Dell and Lenovo, they have some other places to go to find some dollars."


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