Will Microsoft’s New Tablet Generate HEAT Against iPad Sales?

Microsoft (NASDAQ:MSFT) unveiled a line of tablet computers on Monday that includes a consumer device aimed directly at the Apple (NASDAQ:AAPL) iPad, and another, larger machine designed to compete directly with lightweight laptops like Apple’s MacBook Air and the Ultrabooks it inspired. Both will be powered by versions of the new Windows 8 operating system, and each has a keyboard that doubles as a cover.

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The new tablets were introduced at a much-hyped press event in Los Angeles yesterday, and mark a major break from Microsoft’s operating model over the past 37 years, in which it has first and foremost been a software company — the world’s largest — relying on computer manufacturers to make and market machines running Windows. Microsoft’s foray into hardware could upset its relationship with existing hardware partners like Hewlett-Packard (NYSE:HPQ) and Dell (NASDAQ:DELL).

But as Apple’s market share continues to grow in every area in which it competes, Microsoft finally saw fit to follow its example with an integrated approach to hardware and software. Microsoft Chief Executive Steve Ballmer said on Monday that the company “didn’t want to leave anything uncovered” as it rolled out Windows 8.

The new software is the biggest overhaul of Windows in years. It is scheduled to be available for the Christmas shopping season, as is the lighter, thinner tablet, which is built on an Nvidia (NASDAQ:NVDA) chip designed by ARM Holdings (NASDAQ:ARMH). The tablet is comparable to Apple’s iPad, heavier but slightly thinner, with a 10.6-inch screen and the choice of either 32GB or 64GB of memory. The second, heavier tablet is aimed at the next generation of Ultrabooks running on traditional Intel (NASDAQ:INTC) chips. It will be available in 64GB and 128GB models that will be available about three months after the ARM version.

Microsoft gave no details on pricing, but said the new tablet line — named Surface — would be competitive with comparable ARM tablets and Intel-powered Ultrabooks. They will be on sale online and in Microsoft’s new brick-and-mortar stores in the U.S. — another change for the company inspired by Apple’s success.

While the new line was generally impressive, Microsoft focused more on the hardware than on the services, making no mention of integrating content and features from its Xbox game console, the Skype video calling service it acquired last year, or Barnes & Noble’s (NYSE:BKS) Nook e-reader, its new partner in the e-books market, all of which were conjectured about ahead of Monday’s event.

Making its own hardware for such an important product is a major departure for Microsoft, and signals a lack of faith in traditional hardware makers, who have been unable to respond to Apple’s growing threat with any worthy competitor. However, until Microsoft begins to built its own desktops, laptops, and smartphones as well, it will still rely heavily on its hardware partners to keep the Windows ecosystem alive. Taking that into account, Microsoft stressed at the event that original equipment manufacturers, or OEMs, “will have cost and feature parity on Windows 8 and Windows RT,” meaning Microsoft will not hold back any features from other hardware markets’ Windows tablets.

On Tuesday, shares of Microsoft (NASDAQ:MSFT) closed higher 2.88% at $30.70, while shares of Apple (NASDAQ:AAPL) closed up .28% at $587.41.

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