Ballmer Embraces Hardware Approach In Shareholder Letter

Microsoft CEO Steve Ballmer has opened up about Redmond’s hardware approach, which is causing some friction with its hardware partners.

Ballmer said the company can pursue a dual strategy of building products with both Microsoft hardware and software, while also supporting hardware partners that make their own hardware running Microsoft software.

Shareholder Letter

The policy statement was contained in an annual letter to shareholders issued 9 October along with Microsoft’s fiscal 2012 annual report.

“We will continue to work with a vast ecosystem of partners to deliver a broad spectrum of Windows PCs, tablets and phones,” Ballmer wrote, arguing that original equipment manufacturer (OEM) partners such as Dell, Hewlett-Packard, Lenovo, Samsung, Nokia and others also contribute by offering consumers a choice of devices to run Microsoft Windows software.

“There will be times,” he continued, “when we build specific devices for specific purposes, as we have chosen to do with Xbox and the recently announced Microsoft Surface.”

Microsoft ruffled a few OEM feathers when it unveiled the Surface tablets in June that go on sale 26 October. The CEO of Acer, for instance, warned Microsoft to “think twice” before launching its own hardware that would compete with theirs.

Hewlett-Packard said it would decline to develop hardware running Windows RT, the version of Windows 8 for devices running an Atom processor, but will make devices running Windows Pro 8 for devices running x86 processors. However, Microsoft has been working with companies like Asus and Lenovo, among others, who will make hardware for Windows 8.

While Ballmer spoke of “firmly establishing one platform, Windows, across the PC, tablet, phone, server and cloud,” he didn’t clarify whether those phones would be OEM devices or another Microsoft-made device. While rumours persist that Microsoft is planning to introduce its own smartphone running Windows Phone 8, the company continues to reject that speculation.

Apple Approach?

However, Microsoft’s determination to develop both the hardware and software is flattering to fans of Apple like those on the blog Cult of Mac.

“Apple is extremely successful with their current approach, making their own hardware and connecting it to their own software,” wrote Rob LeFebvre on the site. “It looks like the CEO of Microsoft sees this as well.”

In his letter, Ballmer touted other milestones reached or to be reached this year besides the launch of Windows 8 and Surface, including the Windows Server 2012 data centre operating systems, the new Office suite with accessibility from the cloud as well as on-premise, and the integration of the Skype acquisition into Microsoft platforms such as Lync for unified communications.

For fiscal 2012, Microsoft revenue grew to a record $73.7 billion (£46bn) and it reported cash flow from operations of $31.6 billion (£20bn), an increase of 17 percent from the prior year. In addition, the company returned $10.7 billion (£6.7bn) to shareholders through stock buybacks and dividends.

Unmentioned in the letter to shareholders was the $6.2 billion (£3.4bn) write down Microsoft took in July for the 2007 acquisition of the digital marketing company aQuantive, which was part of the Online Services Division that includes its Bing search engine. AQuantive was supposed to provide tools to boost Bing search ad revenues.

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