7 Reasons Why Microsoft Should Make PCs

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Microsoft stole Apple’s retail store idea, as well as the Apple store look and feel, for its first outlet in first store in Scottsdale, Arizona. (A second one is planned for Mission Viejo, California). Trouble is, unlike Apple, Microsoft doesn’t make PCs.

Big monitors and PCs are part of the Apple store aesthetic. Microsoft needed some computers on tables for that Apple Store look. So Microsoft launched what it calls the “Microsoft Signature PCs” initiative — Microsoft-branded Windows 7 PCs that feature Microsoft software and services.

Microsoft Signature PCs are in the news for only one reason: They don’t have crapware, the generally low-quality sponsored software PC makers tend to pre-install on PCs to lower the price.

Microsoft Signature PCs are not made by Microsoft — Microsoft has essentially co-branded with the manufacturers, which are Sony, HP, Dell, Acer and Lenovo. But they should have been. I think the time is right for Microsoft to get into the consumer PC market.

Columnist John Dvorak expressed a similar opinion in a MarketWatch column this week. He argues that if Microsoft is to open stores, it needs to go all the way and sell PCs as well, or the stores will fail. Dvorak is right. But I think much more than just the retails stores are at risk. I think Microsoft needs PCs in order to continue its growth and industry leadership.

Here are seven reasons why Microsoft needs to get into the consumer PC business.

1. The Windows and Office racket ain’t what it used to be.
2. Microsoft is a great hardware maker.
3. Microsoft needs to manage the transition to multi-touch PCs.
4. Microsoft needs to be a bully again.
5. Microsoft needs to lead the market again.
6. Making PCs will make Windows better.
7. Selling PCs will help maintain Windows and Office profits.
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1. The Windows and Office racket ain’t what it used to be.

Microsoft’s incredible growth and success over the years has been based almost entirely on the Windows-Office business. The company has established these brands as hardcore standards, and charged a fortune for them, especially Office. It has leveraged those two products into dominance in dozens of other software categories as well.

But a world of pressures, ranging from price pressures from low-margin netbook and laptop sales to encroaching online office suites like Google Apps threaten to squeeze Microsoft’s cash cows.

Microsoft needs new businesses to get into. Now that it has retail stores and a killer version of Windows on the market, the company should develop a full line of Microsoft-banded desktop, laptop, netbook and tablet computers.

2. Microsoft is a great hardware maker.

Although Microsoft is the world’s largest software company, the company is also one of the biggest hardware makers. The company makes keyboards, mice, webcams and headsets, not to mention game consoles and media players. In all hardware markets it competes in, Microsoft is arguably the best or second best major brand.

People don’t think of Microsoft as a consumer electronics company. But who makes a better gaming console than Sony? Nobody respects the Zune. But let’s face it, Zune would be the best device on the market without the Apple iPod Touch. And I don’t know any Webcam I’d rather have than Microsoft’s incredible LifeCam Cinema HD webcam.

3. Microsoft needs to manage the transition to multi-touch PCs.

Microsoft’s OEM partners have royally screwed up multi-touch systems with Windows 7. Vendors have proved to be laughably clueless about how multi-touch should be used, adding the touch feature to vertical desktop displays, as if people want to work like Frankenstein with their arms straight out.

Microsoft’s Surface team, on the other hand, totally gets touch computing. Microsoft CEO Steve Ballmer previously hinted at a future consumer version of Surface. Microsoft needs to build it, and sell it, without letting the whole initiative be ruined by OEM designers who don’t understand multi-touch computing.

4. Microsoft needs to be a bully again.

Microsoft’s biggest partners, including HP, Dell and others, have shown zero loyalty to Microsoft and Windows. Both aggressively hawk Linux and other non-Microsoft products to customers.

So why should Microsoft unilaterally avoid competing with them? Besides (as Dvorak points out), these companies have to sell Windows. If they don’t, they’ll lose customers.

Microsoft could use its hardware business to keep partners in line. If HP or Dell wreck the Windows experience with crapware or poorly configured or sourced components, Microsoft could step in with directly competitive offerings to steal business.

5. Microsoft needs to lead the market again.

Microsoft Research is one of the best funded and best staffed in the industry. But most of their brilliant ideas go nowhere because Microsoft doesn’t control the process. They have to beg and plead with hardware makers to get this stuff built. I’d love to see Microsoft’s best ideas actually put on the market as soon as possible.

Microsoft PCs shouldn’t be low-margin, bargain-basement commodity PCs, but high-end, leading-edge systems that are unique in some way. This will make their stores cooler, enhance Microsoft’s reputation, and simultaneously lead the industry into a more innovative future.

6. Making PCs will make Windows better.

If Microsoft has a powerful PC group that has input into the Windows development wish list, then Windows will likely become better for all hardware makers.

7. Selling PCs will help maintain Windows and Office profits.

Let’s say that the average PC profit margin right now is $100 for Microsoft for every fully loaded PC sold by the likes of HP or Dell. Five years from now, that margin might be down to $10 per PC, due to encroaching online apps and declining PC margins.

Like Apple, Microsoft gets the software for free. By building high-end PCs with high margins, Microsoft could maintain at least some its profits on Windows and Office by shifting the profit to the PCs.

If Microsoft wants to be like Apple, so be it. The company should design, build and sell consumer PCs directly to customers. As Steve Jobs says, “good artists copy, great artists steal.” Microsoft needs to steal Apple’s whole approach to marketing its products and managing its brand, not just copy its retail store ideas.

It would help the industry. It would benefit some customers. And it would above all boost Microsoft’s future prospects for continued dominance of the industry.