Microsoft admits Surface risks hurting its OEM ecosystem, while hardware business could squeeze its margins

Microsoft has stated in a filing to the US Securities and Exchanges Commission that its forthcoming Surface tablet is likely to hurt its relationship with original equipment manufacturers, while Apple-style vertical integration of hardware and software is likely to put pressure on its margins in the future.

According to ZDNet, Microsoft states that it faces risks in competing with established vertically-integrated hardware and device manufacturers such as Apple and Google/Motorola Mobility:

“We also offer vertically-integrated hardware and software products and services; however, our competitors have been in the market longer and, in some cases, have established significantly large user bases.

Efforts to compete with the vertically integrated model will increase our cost of revenue and reduce our operating margins.”

Last week, SmartCompany reported that Microsoft will initially license five OEM partners to build tablets that run on the Windows RT platform, alongside the consumer version of its forthcoming Surface tablet.

Microsoft’s SEC filing points out the risks involved in this strategy:

“In addition, our Surface devices will compete with products made by our OEM partners, which may affect their commitment to our platform.”


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