With Surface, Microsoft becomes friend and foe to PC partners

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 company has had a mutual understanding with makers of computer hardware: Microsoft creates software.

Companies such as Dell, HP, 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 cosy relationship by making and marketing its own tablet computer. The company announced on Tuesday that the Surface will start at US$499 when it goes on sale on October 26. The new tablet is set to invigorate an already hotly contested market for touch-screen computers. But for the first time, Microsoft will be in head-to-head competition with partners that help generate sales for itsUS$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.

Chief executive Steve Ballmer insists Microsoft 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.