Microsoft moves into chip world with Xbox

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Makes sense

The PC market grew up around Windows, and thus they didn't have to convince anyone to buy into their software products. In newer markets, however, Microsoft has to go up against existing players in the market who are not interested in becoming low-margin movers of hardware like PC vendors. Companies already accustomed to that market aren't a problem, which explains why HP, Toshiba and others have jumped on the bandwagon for products such as Tablet PC and Pocket PC handhelds that are "PC-like". That doesn't apply to game consoles or phones, though, where existing players aren't about to let Microsoft into their market without a fight.

Hence, Microsoft dives ever deeper into hardware. Having the ability to churn out hardware (even if they don't actually make it themselves) means they can enter new markets without having to convince third parties to ship with their software. I still think Microsoft will continue to license their software product to anyone who wants to implement it, but having hardware manufacturing experience (even if entirely outsourced) makes entering new markets much easier.

That doesn't mean Microsoft will end up like a Dell or a Samsung, nor would they want to. More likely, they'll do the sort of thing they're doing with the SPV phone (the Smartphone released by Orange) or XBox, partnering with some hardware company and controlling the hardware specs. I expect more of that sort of thing in the future.

It's sort of a market wedge. Enter the market with your branded product, build demand, and pull more of the majors on board afterwards.

Posted by: John Carroll   Posted on: 11/10/03 You are currently: a Guest | Members login | Terms of Use

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