This week at the annual Consumer Electronics Show (CES) in Las Vegas, Microsoft CEO Steve Ballmer will take the stage for a keynote address in which he will largely focus on tablet-based computers that are based on Windows and aimed largely at stemming the success of Apple's iPad. If that seems like déjà vu to you, you're not alone. Ballmer did exactly the same thing at last year's CES keynote.
The difference, of course, is that PC makers will ship dozens of iPad competitors in 2011, compared with just the flimsy smattering of alternatives that arrived in 2010. In fact, the only true iPad competitor that appeared in 2010 was the Samsung Galaxy Tab, a 7" tablet that runs on Google's Android OS and not on Windows.
For Ballmer, this year's CES keynote isn't just a do-over; it's a chance to reset the playing field and refute the growing sense that Microsoft just isn't competitive in new markets anymore. As such, his keynote is shrouded in mystery. Microsoft's PR firm has denied any pre-show briefings, for the first time ever, and the company's Windows division will not be on hand at the show to provide in-person meetings after the keynote. This, too, is unprecedented.
According to sources at and close to the software giant, Microsoft is expected to reveal its plans for a new version of Windows, optionally based on ARM chipsets, which will be used on a new generation of thin and highly mobile devices. These devices will physically resemble Apple's iPad in many cases, will offer up to 10 hours of battery life, and will run a stripped-down Windows version.
Microsoft won't have a new UI for these devices until Windows 8 ships in 2012, so it's relying on its partners to create new Windows 7-based UIs for these devices in 2011. And while this rumor hasn't been confirmed, Ballmer will almost certainly show off this early Windows 8 UI at CES, which explains why the Windows team won't be on hand at the show: The company wishes for its public demonstration during the keynote to stand on its own and for individual reporters and bloggers not to get mini-scoops by plying Microsoft employees for information.
This strategy is in keeping with Windows division head Steven Sinofsky's way of doing things, and maps nicely to the Windows 7 schedule, as well. You might recall that Microsoft's first Windows 7 revelation came in mid-2008 when it showed off the multi-touch interface for that OS. That was followed by a private beta in late 2008, a public beta in very early 2009, and the final release of Windows 7 in October 2009. Tracing the Windows 8 schedule back from its planned mid-2012 release, we get the first UI revelation at CES 2011 this week, a private beta in mid-2011, and a public beta in late 2011. It all makes sense. But it's all just conjecture at this point—conjecture that makes plenty of sense if you know how Sinofsky's team works.
What Microsoft is fighting here isn't so much the iPad of 2010, but rather the iPad of the future. Apple's first iPad release is missing some very obvious key features, but the company will move quickly to fix that, as will a new generation of Android-based competitors. Apple will release its 2010 iPad sales figures sometime this month, but if we assume a blockbuster holiday season, the company could have sold as many as 14 million of them. That's a tiny percentage of the PC market, but the size of the tablet market is expected to grow dramatically as capabilities improve—up to 40 million units in 2011, for example—as cost goes down, and as the competitive ranks expand. Microsoft intends to be part of that competition and do to the tablet market what it did to the netbook market: Seize control from the initial dominant player and turn it into part of the Windows-oriented PC world.
This strategy isn't far-fetched, and while many—myself included—feel that the software giant is moving too slowly, the truth is that it could in fact catch up with and even surpass Apple and the Android camp. On the other hand, there are factors that make the tablet market quite different from that of the netbook market. And the biggest difference is apps: Both the iPad and Android are serviced by tens of thousands of proprietary apps that enhance the value of those platforms and engender a form of lock-in to the users who have already spent time and money downloading and paying for those apps. Switching to an alternative would require them to give up those apps. And that might prove to be problematic for existing customers.
Which, others will note, doesn't really matter. Even if Apple had a blockbuster year for the iPad in 2010, there currently are fewer than 15 million tablets out there in the world right now. And if you accept the fact that this market is only going to grow, that means that the majority of tablet users a year or two from now won't have app lock-in to worry about, as they're effectively new customers. But Microsoft will need to support its tablet products with app stores of its own, much as it does for its Windows Phone smartphone platform. And a version of the Windows Phone Marketplace aimed at these new devices is the logical place to start. Will Microsoft announce such a thing at CES? It's something to look for. If it doesn't, its new Windows version—and the tablet market that will spring up around it—could be stillborn.
So there's a lot to look for at this year's CES, from a Microsoft perspective. There will be some Windows 7 and Windows Phone 7 momentum, but also looks to the future for both platforms in the form of Windows 8 (on PCs) and the slew of functional and bug-fix updates that the company desperately needs to ship for its smartphone platform. I expect to hear about a new Windows version that will run on both ARM and Intel-type hardware, enabling true iPad alternatives from the Microsoft camp. The company will talk up its video game advances, particularly the Kinect, and should explain how getting a Kinect now is actually an investment, since the device will work with Windows in the near future, as well.
Make or break? Not quite. But in a tech industry in which perception often trumps reality, Microsoft needs to fight back. I expect an aggressive CES presence. Anything less, and we'll be dealing with "Microsoft is dead" stories for the rest of the year.
