Steve Ballmer’s curious tablet strategy: Microsoft’s latest competitor is Microsoft

What would you do if your business had to write off $US900 million in inventory on a product line that, despite a modest $US898 million in advertising, failed to capture the public’s imagination?

How’s about if there were something like six million unsold units gathering dust in your warehouse?

As a business owner, how would you react if, despite all this money and inventory, you managed to sell just 1.7 million units of this product in nearly a year while one competitor (Samsung) was selling 8.8 million units of a similar product per quarter, while another (Apple) sold around 14.6 million per quarter?

What if your key business partners attacked you openly in the media as a result of this product encroaching on their businesses?

If the otherwise mild-mannered chairman of one of your closest partners (Acer) went so far as to publicly say this: “We have said think it over. Think twice. It will create a huge negative impact for the ecosystem and other brands may take a negative reaction. It is not something you are good at, so please think twice.”

Well, that’s the situation recently confronting Microsoft’s outgoing chief executive, Steve Ballmer, following the release of the company’s Surface line of tablets.

So how did he respond?

First, Ballmer announced the company was going to be restructured as a “devices and services” company. In other words, more tablets are coming.

Next, Ballmer announced his resignation amid speculation he was pushed over the failure of the first-generation Surface.

Soon after, it is announced that Microsoft is buying Nokia.

Then, in late September, Ballmer announced a sequel to the Surface tablet – the Surface 2.

In turn, in the kind of news that would probably make former Nokia executive Tomi Ahonen’s head explode and former chief executive Jorma Ollila weep, Nokia has gone ahead and announces its own consumer tablet, the Lumia 2520, in direct competition with the Surface 2.

And it’s not as though Microsoft didn’t know about the Lumia 2520 when they decided to purchase Nokia – in fact, it’s believed the launch was temporarily put on ice as a result of the takeover.

Of course, if you missed Nokia’s big announcement, that’s understandable. Another company was also launching a tablet on the same day. You might have heard of them. They’re called Apple.

The end result is that instead of having just one tablet to sell to consumers this Christmas, Microsoft/Nokia now has two consumer tablets competing head-to-head against each other in the already limited Windows tablet market.

Now, there are ways this could all work out. Perhaps the two devices will be positioned at slightly different markets?

Or perhaps Microsoft intends to keep a strong separation between its ex-Nokia product lines and its own products, as Google is doing between its Nexus series of devices and its wholly-owned smartphone subsidiary, Motorola?

Maybe, at this point, Microsoft is happy to throw a bunch of devices just to see what sticks to the surface? (Or should that read “what sticks to the Surface?”)

At this point, Microsoft’s shareholders will probably be content knowing that there is a strategy at play with a reasonable chance of success.

Because in the highly competitive devices market, two competing tablets from Microsoft appears to be a rather curious strategy.