Microsoft Needs Help To Compete In Tablet Market

Microsoft could claim substantial market share from Apple in the growing tablet PC arena, but will need to both engage its manufacturing partners and create software that allows a tablet to interact with products such as the Xbox, according to a research report produced by analyst firm Forrester.

Apple currently dominates the consumer tablet PC market with its iPad, which sold more than 1 million units in the month following its April 3 release. Even before the iPad reached store shelves, however, Microsoft and other IT giants were planning their own entries into the arena; during January’s Consumer Electronics Show in Las Vegas, Microsoft CEO Steve Ballmer used his keynote address to display several tablets that he said would run Windows 7.

One of those devices, produced by Hewlett-Packard, was touted by Ballmer as a key example of the upcoming synergy between Windows 7 and the tablet form factor. In the interim, though, HP acquired Palm and will likely produce a tablet that runs on the Palm WebOS. Despite that setback, former Microsoft CEO Bill Gates suggested in early May that the company has other tablet projects in the works.

“Tablets are the next important computing form factor,” J.P. Gownder and Sarah Rotman Epps, analysts with Forrester, wrote in that May 27 report. “To keep its products front and centre, Microsoft needs a partner to produce a successful Windows tablet that competes with the Apple iPad. At stake is nothing less than the future of the operating system (OS): For Microsoft to remain relevant to consumers, it needs to adapt its operating system to new form factors beyond the traditional PC.”

Competition hotting-up

The competition doesn’t stop at the Apple iPad, however; Google is collaborating on tablets that integrate a modified version of its Android operating system, which has proved increasingly popular on smartphones, while Hewlett-Packard will likely push its own multitouch devices utilising its newly acquired Palm WebOS. As the devices gain acceptance among consumers and possibly businesses, the number of developers creating must-have applications for these platforms will likely increase, in turn creating a positive feedback loop that increases tablets’ ubiquity and popularity.

Tablets running Windows 7, the analysts added, have a chance at marketplace success if Microsoft follows a few key steps. First and foremost, the tablets must provide “a simple, streamlined, guided experience” along the lines of Microsoft’s Zune HD and Kin phones’ user interface: “Microsoft and its partners must develop UX shell(s) appropriate to the tablet format to compete with Apple’s excellent iPad experience.”

The second part is promotion, which will mean heavy spending by Microsoft and its partners to capture market share. That will work in conjunction with an appropriate price point: “If a sub-$499 tablet offers a bad consumer experience, it will fail. Prices above $750 would almost certainly be too high for a complementary device that acts as a second, third or fourth PC in the home.”

Lastly, placement in a variety of channels—“Microsoft and its partners must look outside Best Buy here”—is also vital, in the analysts’ estimation. Additionally, Microsoft needs to think ecosystem: A tablet that “synchs with the Xbox 360—with all the implied benefits, including the Natal interface—would be a killer hub for the digital home, enabling back-and-forth streaming of videos and games that one-ups the capabilities of the iPad.”