Microsoft Prepares to Back Off -- Again


Over the past year, Microsoft has taken two very large risks. Neither has panned out the way that the software behemoth had envisioned, and it's now being forced to back off of both of its big pushes.

There's been plenty of controversy over Microsoft's original Xbox One plan. The ideas of used game restrictions and online check-in requirements didn't resonate with gamers, despite Microsoft's attempts to boldly position the changes as a way to future-proof the console by tapping into the cloud and embracing digital distribution. Following significant backlash, Microsoft was forced to completely reverse those policies in favor of a more traditional model.

The other big risk that the company took recently was none other than Windows 8, whose ambitious redesign of the core interface left consumers confused and PC unit shipments in shambles. Perhaps the biggest point of contention among Windows 8 users is the new Start Screen that replaces the familiar Start Menu. It's this design element that Microsoft is also now partially backing off of for the Start Screen in Windows 8.1. Instead of jumping to a new screen, Microsoft will overlay the Start Screen over the desktop as a more seamless experience.

Microsoft's Build developer conference kicks off tomorrow in San Francisco, and a public preview Windows 8.1 will be the main course. What else might investors see come out of Build?

Surface expansion
It's been almost exactly one year since Microsoft hosted a secretive event to unveil its Surface tablet. Microsoft's foray into first-party tablet hardware is among the biggest strategic shifts in its history. Major tech players now tend to gravitate toward annual product cycles, so it's possible that investors will hear something about the second-generation Surface models. The twist is that while Surface was unveiled last June, it wouldn't launch until October (Surface RT) and February (Surface Pro).

There's also been plenty of talk of new members to the Surface family, such as a Surface smartphone or Surface Book laptop. Microsoft also has yet to enter the small-sized tablet segment directly, and a smaller Surface also makes sense. All of these seem like inevitable progressions to Steve Ballmer's vision of Microsoft becoming a "devices-and-services" company. Previous rumors suggested that a Surface Book would sport Intel's Haswell processors, which are just now starting to hit the market.

Bloomberg just reported last week that Microsoft was switching to Qualcomm Snapdragons for its second-generation Surface RT, displacing current provider NVIDIA . Qualcomm's strengths in cellular integration may be doing it favors in tablets at last, as Microsoft is supposedly looking to add cellular options this time around. Moving to Qualcomm makes sense, as Microsoft's Windows Phones have always run exclusively on Snapdragon processors.

It's also been rumored that Qualcomm scored the win in Google's second-generation Nexus 7, also grabbing the seat from NVIDIA. If so, that would be two of NVIDIA's highest-profile design wins from 2012 going to its biggest mobile rival. That's to be somewhat expected, though, as NVIDIA strategically chose to postpone the Tegra 4 schedule to focus resources on its Tegra 4i -- some time-sensitive design losses were inevitable.

Developers, developers, developers
Naturally, Microsoft will be catering heavily toward developers. It is a developer conference, after all. The company is fully aware that it needs to bolster its content availability. Windows Phone's app count growth has slowed in recent times, and Microsoft is still trying to get more native "Metro" style apps in the Windows Store.

To that end, the company has reportedly begun offering incentives of up to $100,000 to developers willing to build Windows Phone apps.

Developer conferences have become important events for companies to communicate with different stakeholders. Google I/O was in May, and Apple WWDC was two weeks ago at the same venue. Tomorrow is Microsoft's turn to step into the limelight.

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Fool contributor Evan Niu, CFA, owns shares of Apple and Qualcomm. The Motley Fool recommends Apple, Google, Intel, and NVIDIA. The Motley Fool owns shares of Apple, Google, Intel, Microsoft, and Qualcomm. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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