Tablet’s launch pits Microsoft against partners

Microsoft’s Surface tablet computer is expected to go on sale Oct. 26 and stir up an already competitive market.

Damian Dovarganes/Associated Press/File

Microsoft’s Surface tablet computer is expected to go on sale Oct. 26 and stir up an already competitive market.

LOS ANGELES — With the launch of its Surface tablet computer, Microsoft is becoming a genuine ‘‘frenemy’’ — part friend, part enemy — to its longtime manufacturing partners.

Since its founding 37 years ago, the Redmond, Wash., company has had a mutual understanding with makers of computer hardware: Microsoft creates software. Companies such as Dell, Hewlett-Packard, Acer, and Lenovo pay Microsoft a licensing fee to place the Windows operating system on the desktop PCs, notebooks, and other gadgets they market to consumers.


Now, Microsoft is complicating the cozy relationship by making and marketing its own tablet computer. The company said Tuesday that the Surface will start at $499 when it goes on sale Oct. 26. The tablet is set to invigorate an already hotly contested market for touchscreen computers. But for the first time, Microsoft will be in head-to-head competition with partners that help generate sales for its $14 billion-a-year Windows software business.

Microsoft is no stranger to manufacturing hardware, but it usually does so in businesses that are sideshows to its mainstay computer software. It has made the Xbox game console since 2001, for instance. It also made the Zune music player and Kin line of phones, although both were short-lived.

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Chief executive Steve Ballmer insisted Microsoft Corp. must move into manufacturing to bring consumers ‘‘delightful, seamless experiences’’ that they can enjoy ‘‘right out of the box,’’ according to a letter he wrote to shareholders recently.

Of course, it is not just for the sake of consumers. The strategy could pay off for Microsoft, too. The company is coming out with a new version of Windows next week, one that is optimized for touchscreen devices and will run on tablets and PCs. Every time it sells a Surface, analysts say, Microsoft will record some revenue for the Windows 8 operating system. Manufacturers that build competing Windows 8 tablets will pay Microsoft a fee, estimated between $30 and $80 per device.

That is a big expense, especially considering that manufacturers are allowed to use Google Inc.’s Android operating system for tablets and smartphones for free. The extra cost of making Windows 8 tablets could put Microsoft’s partners at a disadvantage in a cut-throat tablet market.


The expense also comes at a time when tablet prices are dropping.

In the past few months, Google and Inc. have undermined tablet leader Apple Inc. with 7-inch-screen tablets using Android. The cheapest goes for $159.

Apple, too, is expected to downsize its iPads with a mini version that might also give consumers a price break ahead of the holidays.

Microsoft’s Surface has a 10.6-inch screen, slightly bigger than the iPad’s 9.7 inches. Unlike the iPad, Surface also has the ability to run Office and other Windows applications. That, plus its optional touch keyboard cover for $100 more, may enable the devices to cross the productivity gap between tablets and PCs.

Microsoft’s partners are trying — at least publicly — to remain upbeat about their coming competition with Surface.

‘‘Surface is about Microsoft standing up and saying, ‘We want to make sure the market understands the importance of Windows 8,’ ’’ said Tom Butler, director of ThinkPad marketing for Lenovo. ‘‘All the Microsoft Surface announcement does is help validate the ecosystem that we all want to see develop around the new interface.’’

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