Here’s Why Microsoft’s Tablet Could Be BAD for Business

Microsoft’s (NASDAQ:MSFT) foray into hardware with its new Surface tablet is being met with hostility from some within the PC industry, who according to a new report, are experiencing a “sense of betrayal” over the secrecy behind the new device, which will directly compete with their own Windows-based tablets.

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At a media event held in Los Angeles on Monday, Microsoft CEO Steve Ballmer presented the company’s first-ever tablet, which will come in both ARM (NASDAQ:ARMH) and Intel (NASDAQ:INTC) versions. Though he said in an interview after the event that Microsoft’s PC partners knew about the announcement in advance, a new Reuters report claims that Microsoft’s closest partners were provided with only vague details just three days before the unveiling.

Industry sources told Reuters that Windows boss Steven Sinofsky made some calls to partners last Friday, only three days before the event, and didn’t provide the name or specifications of the Surface. “As such, Microsoft’s main partners remained “in wait-and-see” mode and had to monitor the news for details, one of the sources said,” the report noted.

Meanwhile, it seems some of the Windows maker’s largest vendors were left completely out of the loop. Sources from Acer and Asus said the news conference was the “first they had heard” of the project.

No senior executives heard about the news last week,” an Acer executive told Reuters, noting that the company is still seeking details. “We’re quite surprised.”

Though the tablet is not Microsoft’s first foray into hardware — the Xbox, the less successful Zune digital music player — the company has largely been content to build software and let vendors worry about the hardware. But with Apple (NASDAQ:AAPL) posing a mounting threat, it seems Microsoft couldn’t help but give its competitor’s business model a try — even if that means alienating its current partners.

One industry source said that partners who weren’t informed of Microsoft’s plans ahead of time are now feeling a “sense of betrayal.”

“This has always been a point of contention between OEMs and Microsoft — Microsoft getting into the hardware space,” said another tipster.

Ovum analyst Jan Dawson told Reuters that Microsoft’s tablet represents a “huge vote of no confidence” in its OEM partners and added that those partners are right to “feel slighted.”

Still, not all partners responded in the negative — PC makers Dell (NASDAQ:DELL) and Lenovo both voiced their continued commitment to Microsoft as a valuable partner. Of course, that support may go out the window when it comes time for Microsoft to price its tablets.

Analysts believe Microsoft will have to undercut the iPad’s price if it is to stand a chance of competing with Apple, but doing so could anger other tablet makers whose costs are higher because they must pay Windows licensing fees to Microsoft. And with Google’s (NASDAQ:GOOG) Android already a more popular operating system for tablets, some of Microsoft’s partners may choose to jump ship for a decidedly more inexpensive platform.

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