Microsoft

Why Microsoft’s Surface Tablet Shames the PC Industry.

On June 18, Microsoft (MSFT) beckoned 200 or so members of the media to a grimy, industrial part of Hollywood for what it described as a can’t-miss affair. Dutiful reporters met at the appointed hour—3:30 p.m.—at a film and art studio Microsoft had rented out and emptied for the day. While beads of sweat formed on the foreheads of the people waiting to get in, aspiring actresses walked by in tight jeans and high heels on their way to a T-Mobile commercial casting call at the building next door.

Microsoft usually begs for attention. On this day, it played the cool maestro. In fact, the company played the Apple (AAPL) role, using pomp, circumstance, and constructed anticipation to make us believe that something really fantastic would appear. Perhaps the whole thing worked: Something that did seem rather fantastic arrived at about 4:20 p.m. It was the Surface tablet—a computer that had all its software and hardware made by Microsoft. In that moment, Microsoft became not just a competitor to Apple but also a rival to such longtime PC manufacturing partners as Hewlett-Packard (HPQ), Dell (DELL), and Acer (2353:TT).

Steve Ballmer, Microsoft’s chief executive officer, tried his best to soften this affront to the company’s partners. When he arrived in 1980, he said, Microsoft’s best-selling product was the SoftCard, a hardware device that would plug into Apple computers so they could run extra software. “Let’s take a little bit of a look back at the role of hardware at Microsoft,” Ballmer said, as a marketing video spun up to show mice, keyboards, and, of course, the Xbox.

Let’s be clear, though: Microsoft making hardware is not a natural action. It’s what the company does in times of desperation. With the release of Windows 8 looming, Microsoft was indeed desperate for a hardware company to do something to blunt Apple’s runaway tablet machine. The Surface tablet represents an indictment of the entire PC and device industry, which has stood by for a couple of years trying to mimic Apple with a parade of hapless, copycat products.