Intel's Atom chips, once suited for powering anemic set-top boxes and tablet PCs, have been dramatically improved. Unfortunately, their biggest competitor is sitting right next to them: Intel's Core chips for PCs.

Intel announced a new revision to the Atom chips, known as "Silvermont," this week, something that consumers should cheer about. Like an engine that can power cars, trucks and boats, the Silvermont architecture will end up in everything from phones to PCs.

That's where the problems begin. Intel needs the Atom, a low-cost, low-power, Windows-capable chip, to compete with ARM in the phone market — something earlier generations of the Atom notably failed to do. But what if PC buyers actually prefer the Atom to Intel's high-priced Core? What does Intel do then? It takes it in the shorts, that's what. And likes it.

Intel vs. Intel

It's not an abstract concept. Intel executives promised that Silvermont Atoms will deliver twice the performance and consume four times less power than its rival processors, and - more important - deliver about two to three times the performance of the last-generation Atom chips that powered the early convertible tablets.

From a performance standpoint, that means that you'll be able to buy far more powerful Windows tablets that push closer to what the Core offers. And from a price perspective, those tablets will cost about $200 or so - about the price of the Core processor, by itself.

Sure, Intel's Core chips will improve, too, with the "Haswell" revision due this summer. But we're seeing a stagnating traditional PC market in part because there most people don't have much need for constantly increasing processor performance. Remember, Windows 8 was designed to be more efficient than Windows 7, and thus requires less memory and raw computing power.

In other words, Microsoft was intrinsically designing toward the Atom, not the Core.

But if consumers see that the new generation of Atoms provide good-enough performance, that result should be an acceleration of low-cost PCs - possibly even enough to give the PC market a real jolt. That would certainly help Microsoft's hopes for a resuscitated PC market, but it would leave Intel holding the bag. Microsoft has another motive, too: Either it adopts the new chips, or its Surface tablet gets priced out of the market.

Why Does Intel Need the Atom And The Core?

In some ways, the Atom is Intel's do-over. Intel was built upon performance: raw computing power that powered PCs and servers, driven by manufacturing that always remained a step ahead of the competition. Intel really didn't care about low-power chips until a company called Transmeta pushed it into the mobile market. And even then, Intel was trading off power for improved performance, even into its most recent Core chips.

That opened the door for yet another Intel competitor, ARM, a technology company that licenses its chip designs to the likes of Qualcomm and Nvidia for use in phones by Apple, Samsung, and Motorola. (That is, virtually all of the smartphones made today.)

Intel had its own shot to enter the phone market with an ARM design, the StrongARM, but squandered its shot in the early 2000s. Eventually, Intel decided to meet the ARM challenge with an x86, Windows-compatible chip, and designed the Atom.

The industry, however, never really expected the Atom to actually succeed in the phone space. Lenovo's announcement of the Atom-powered K800 in 2012 represented Intel's first smartphone design win ever, and it was certainly the equal of any phone at the time. Unfortunately, the K800 never made it to U.S. shores, being designed for China Telecom. More Atom-powered phones have followed, all in Asia. But a handful of design wins in Asia is a lot better than nothing. 

So we know this: Intel can't give up on the Atom, because of the potential market of billions of phones and tablets it hopes to capture. But within the PC market, Intel runs the real risk of cannibalizing the Core.

So What Happens?

Who needs apps? Microsoft buying Nook Media would be a a brilliant move: Microsoft would add millions of e-books that consumers want, to supplement tens of thousands of apps that, well, they don't.

Is Microsoft About To Buy Nook For $1 Billion?

TechCrunch reported Thursday that Microsoft is considering paying $1 billion for Nook Media, the division of Barnes & Noble that includes both the Nook tablet as well as its e-book business. That works out to a discount of about $700 million to $800 million compared to what Barnes & Noble valued the Nook at just a few months ago. A deal at that level would be a clear indication that B&N wants out of the digital business.

So much so, in fact, that there have been rumors that Barnes & Noble plans to kill the Nook by the end of April 2014, instead selling its e-book content on apps from "third-party tablets" from an undisclosed manufacturer or manufacturers. That could mean Microsoft's own tablet, the Surface, steps in to replace it - and we're already getting reports of smaller, Nook-like Windows tablets in the works. Of course, Nook is already available on the iPad and non-Amazon Android tablets.

(See also Microsoft, Barnes & Noble Release Windows 8 Nook App: Is A "Nook Surface Next?)

TechCrunch's report suggests two key factors: developing, manufacturing and selling a tablet like the Nook isn't a profitable business. But e-books are. By itself, the Nook unit lost $262 million on $1.2 billion for the fiscal year ended April 30, TechCrunch's secret documents alleged. Meanwhile, B&N itself publicly disclosed that its Nook segment revenue dropped 26% last quarter, but e-book sales grew 6.8%. (Some 10 million Nook tablets and e-readers have been sold, and the service boasts more than 7 million subscribers.)

We also know that Microsoft has already forged ties with software developers, including game creators; has established relationships with the music business to create Xbox Music; and has developed a network of cloud servers which can serve that content up virtually anywhere. Adding book publishers to the list should be relatively simple.

Microsoft has already proved its interest in the Nook platform. In 2012, Microsoft dumped $300 million into Nook Media, which later generated a Nook app for Windows 8 and not much else. It certainly looks like Barnes & Noble isn't heavily invested into the relationship. It's time for Microsoft to take over.

Patching The Windows App Store With Books

People need a compelling reason to buy a new device, and Microsoft hasn't given them much of one. Microsoft's Surface is a terrific piece of hardware, but is overpriced compared to rival tablets. Meanwhile traditional PCs are on the decline, perhaps even being pushed down the slope by Windows 8. Microsoft's platforms simply lack the app support of iOS and Android.

Windows Store apps, as measured by MetroStore Scanner.

Moreover, if apps are now a key tablet selling point, Microsoft doesn't have that much to offer. Microsoft's app store is growing quickly - but that's due to the fact that it's starting from a very small base. As of Thursday, MetrostoreScanner, which tracks the apps that appear and are updated on Microsoft's Windows Store, showed a total of 70,182 apps in the Store - about double what it had at the end of December. Google and Apple, on the other hands, each claim about 800,000 apps in their respective app stores.

In the company's defense, Tami Reller, Microsoft's Windows chief, has argued that the Windows Store has aggregated more than the number of apps that iOS did during the same period. She also said that almost 90% of the entire app catalog is downloaded every month - a puzzling statement, meaning that either Microsoft is doing an excellent job promoting app discovery, based on its Mimvi technology - or that Windows uses really don't have that much to choose from. 

E-Books Complete The Windows Store 

Adding e-books won't make Microsoft's app problems go away. But they could provide a pretty big distraction. Not to mention that owning the Nook platform would dramatically broaden Microsoft's content strategy to include iPads and Android tablets. Microsoft has also hinted at plans to integrate Nook content in Office, putting its digital content in front of millions more users. That would be a welcome change from Microsoft's decision not to rush out Office for iOS and Android. 

(See also Why Microsoft Is Tying Barnes & Noble's Nook To Windows, Office And Bing.)

Finally, it may seem simplistic, but one of the more compelling reasons to add Nook content is simply what users see - or don't see - on the Windows 8 Start screen: Games, Music, Video - but not Books. It's a glaring omission, and one that Microsoft could solve with a single stroke of the pen - and a billion dollars.

Image Sources: Pearson Media (Nook App) Barnes & Noble (Nook)

Microsoft had some news today: It confirmed plans for smaller "touch devices" in coming months — i.e., the rumored Smaller Surface — and preemptively blamed a presumably darkening outlook for Windows on the "declining traditional PC market." It also reported growing revenues and profits for the quarter that ended in April.

Just as important, though, might be what Microsoft didn't say. It was mum about the performance of its flagship Windows 8 operating system, and wouldn't say how well its Surface tablet has been selling. Hmm.

By The Numbers

Microsoft reported net income of $6.06 billion (72 cents per share) on revenue of $20.49 billion for the quarter, an 18 percent increase in profits and an 18 percent increase in revenue versus a year ago. After adjusting for $1.66 billion in Windows Upgrade, Office and Xbox upgrades, and a $731 million fine assessed by the EU, Microsoft reported diluted earnings per share of 65 cents.

Analysts polled by Yahoo had expected Microsoft to report earnings of 68 cents per share, up 13% from a year ago, and grow revenue by 18 percent to $20.56 billion. Microsoft also said that Peter Klein, the company's chief financial officer, would leave at the end of the fiscal year, or June. Microsoft will name a replacement in the next few weeks.

When all is said and done, Microsoft's bottom line is healthy — every product division reported increased profits except for the company's online business, where losses shrank. But as the company itself admitted, the outlook for Microsoft's Windows division and Windows 8 remains, at best, uncertain.

How Many Windows 8 Licenses? Redmond Sayeth Not

Microsoft reported $5.7 billion in revenue and $3.5 billion in profits for the Windows division, but once you set aside deferred revenue due to Windows upgrade offers, revenue was basically flat compared to a year ago. And then there was Microsoft's continued silence on how many Windows 8 licenses it sold.

Both IDC and Gartner blamed the slow uptake of Windows 8 for a stunning drop in first-quarter PC sales: 14% by IDC's metrics, and 11% according to Gartner. Most of the top PC manufacturers saw sharply lower sales for the first quarter, according to both firms, with Lenovo the big exception.

In January, Microsoft said it had sold more than 60 million Windows 8 licenses. That was up significantly over the number of pre-launch licenses it sold — 40 million in the first month, Microsoft said last year. And yet now the company has gone silent on the subject. This is not what you'd normally consider a good sign, particularly coupled with Redmond's oracular statement about the declining PC market.

On the other hand, Klein offered no shortage of happy talk about Windows on the analyst call. Check it out (MS Word doc).

Surface Gets Small, But Sales Remain Numberless

Outgoing CFO Peter Klein confirmed rumors of a smaller Surface tablet in a backhanded sort of way. During Microsoft's conference call with analysts, Klein declined to say how many Surface tablets the company had sold (again, not exactly heartening news). But, he said, the lineup will be refreshed with smaller "touch devices" in the coming months.

IHS iSuppli estimated that Microsoft sold, at most, one million Surface tablets during the fourth quarter. That's compared to a record 22.9 million Apple iPads, plus millions more Nexus 7s, Kindle Fires, and other 7-inch tablets.

Separately, Klein said that Microsoft was looking ahead toward Windows Blue, the next iteration of Windows 8 and, possibly, Windows Phone. He told analysts that Blue is designed to "further advance" Windows 8 and "in response to customer feedback." Rumors suggest that feedback may lead to the return of the Start button and an ability to boot directly to the Windows desktop, as opposed to the way Windows 8 forces all users into the tile-layout "Metro" interface.

Return To The Enterprise

Microsoft's Office division returned to growth in the quarter, with revenues up 8% to $6.3 billion. In January, Office delivered a nasty shock — a 10% revenue decline — apparently because the company's online service based version of the productivity suite, Office 365, hadn't performed as expected.

“Our enterprise business continues to thrive,” said Kevin Turner, chief operating officer at Microsoft, in a statement. “Enterprise customers are increasingly turning to Microsoft for their IT solutions and as a result, we continue to take share from our competitors in key areas including hybrid cloud, data platform, and virtualization.”

Microsoft's rock, its Server and Tools business, reported $1.98 billion in profits and $5.0 billion in revenues. Microsoft's Entertainment business, which includes the Xbox, returned to profitability, reporting $342 million in profits and $2.5 billion in revenue. Online services only lost $262 million (versus $480 million a year ago) and reported $832 million in revenues. 

The next few quarters will be important for Microsoft, as the company's large installed base of corporate customers still using Windows XP must either switch by April 8, 2014, or else risk losing support for both XP as well as Office 2003. Earlier this month, Microsoft offered small businesses a 15 percent discount for upgrading to Windows 8 Pro and Office 2013.

Perhaps you're not a fan of Microsoft's Surface tablet. Would you prefer to try something a little... smaller? Microsoft might be ready to oblige you.

According to the Wall Street Journal, Microsoft that it apparently plans a smaller 7-inch Surface, one that would compete with the Google Nexus 7, the iPad Mini, and Amazon's Kindle Fire. It will apparently launch the new product as part of a broader overhaul of its Surface tablet lineup later this year.

Microsoft may have had little choice. Its Surface and Surface RT tablets haven't exactly lit the world on fire, while sales of the smaller iPad and Android tablets have taken off.

Microsoft originally envisioned the Surface as an answer to the exploding tablet market, which is starting to dominate the computing landscape and is cutting into sales of traditional PCs. Microsoft hasn't formally released sales numbers, but IHS iSuppli estimated that Microsoft sold, at most, one million Surface tablets during the fourth quarter, compared to a record 22.9 million Apple iPads, plus millions more Nexus 7s, Kindle Fires, and other 7-inch tablets.

The Surface, of course, has been hampered by its relatively high price, consumer dissatisfaction with the new Windows 8/RT operating system, and the lack of Windows RT applications for the Surface RT. It's worth noting that both of the latter  factors would weigh every bit as heavily on a hypothetical Surface Small.

But what impact would shrinking the form factor have on the Surface? Let's take a look.

Portrait Mode Problems

On the, er, surface, shrinking the Surface to a 7-inch form factor is a terrific idea. A 7-inch tablet is slender enough for most male hands to hold comfortably, and it fits well inside a purse, protective sleeve, or the relatively roomy pockets of my khakis. As Amazon's Kindle demonstrated, the tablet is about the size of a book page.

But orienting the Surface in portrait mode — the most comfortable way of holding a 7-inch tablet, in my opinion — is problematic. From my experience in playing with the Surface (I don't own one), some apps work well in portrait mode. But the Windows 8 desktop isn't really optimized for vertical viewing.

Analyst Tim Bajarin concluded much the same thing:

Windows 8 and Surface appear to be built primarily for one mode: landscape. Given that Windows 8 is built for a 16:9 format, this is not surprising; the software was architected for landscape. Although the screen can be used in portrait mode, doing so presents a far less enjoyable experience than in landscape. For some, this may not be a problem, but for me it is fundamentally counter-intuitive to what I consider a pure tablet experience.

Specifically, Bajarin called out Skype and the Office keyboard for failing to work in portrait mode. 

Of course, there's no reason Microsoft couldn't update the Windows software and apps to better support portrait mode. It would have to do so, though, to make a smaller 7-inch Surface a pleasant user experience by the time that product launched.

Shifting From Writing to Reading

One of the chief advantages of the Windows RT version of Surface is the Office package that Microsoft bundles with it. The 32GB version of Windows RT costs $599 with a Touch Cover; for $139.99, you can buy a standalone version of Office Home and Student 2013 for a PC. In other words, Microsoft is tossing in a software package worth a quarter of the Surface RT's price, for free.

Users could continue to use Office within a 7-inch environment. But combining Office with a Touch or Type Cover turns the Surface into a content-creation device. There's really no way Microsoft could release a 7-inch Touch Cover, or bundle a full-sized Touch Cover with a 7-inch device. Both would look awkward. (Yes, like other tablets, you could still wirelessly connect a Bluetooth keyboard.)

If you remove those elements, the Surface probably sinks to the level of a Nexus 7 or Kindle Fire, both designed as shopping and read/watch/play portals to the Google and Amazon content stores. In this space, Microsoft simply doesn't have the clout to compete with the other two vendors, and its lack of apps versus the iPad mini will be thrown into sharper focus.

Metro Only?

Could Microsoft design a 7-inch Surface strictly around the Metro interface? It would be a bold move, and a risky one; again, Microsoft would risk frustrated consumers fumbling around with Web pages when rival tablets had dedicated apps in place to perform the same functions.

But the Windows 8 desktop environment would probably look even more out of place in a 7-inch form factor than on the larger 10-inch Surface. And on Windows RT — the only real Windows OS one would run on a 7-inch tablet, with an ARM chip inside — the desktop is sort of an afterthought, anyway. At that point, Microsoft would probably have to decide to eliminate Office from the tablet altogether.

Thank goodness there's a Netflix Windows RT app.

Xbox Integration?

Microsoft has already taken the first steps toward combining the Xbox 360 game console, tablets and phones with SmartGlass, an app that makes the mobile device a "second screen" for gameplay. If Microsoft were to release a tablet optimized for playing games and watching TV or movies, what better way to do than to align it with the Xbox?

Years ago, Microsoft developed a line of small tablets dubbed UMPCs, which failed to take off, among other reasons, because their battery life stank (i.e., it was on the order of a few hours). But maybe the time is right to try a smaller Microsoft tablet once again.

Some love the Surface. I think it's great, and I still may pick up a Surface with a Type Cover myself. Thinking that shrinking the Surface down to a 7-inch form factor will immediately revitalize sales, though, is wishful thinking. 

Still, Microsoft needs something to jumpstart sales, and a conservative, follow-the-leader approach towards a smaller form factor can't hurt. But Microsoft risks losing a lot of what makes a Surface a Surface if it does so.

The PC market tanked in the first quarter, IDC reported. Shipments fell by a stunning 14% from a year earlier, almost twice what IDC had predicted and the worst performance since the firm began tracking the market in 1994. Can we all agree now that Windows 8 has wounded an already dying PC market?

Gartner chimed in, too: worldwide PC shipments totaled 79.2 million units in the first quarter of 2013, a 11.2 percent decline from the first quarter of 2012. Global PC shipments went below 80 million units for the first time since the second quarter of 2009, the firm said.

The question now is just how severe the damage is. And man, it looks bad.

Granted, first-quarter sales figures inevitably fall from the fourth quarter. But that's why quarter-over-quarter metrics are important, as they eliminate seasonal variation. Unfortunately, this is the fourth straight quarter of declining PC sales. U.S. sales fell 12.7 percent year-over-year, and 18.3 percent versus the fourth quarter.

Windows 8, In The Office, With A Touchscreen

When you put it that way, IDC's report reads like an obituary. And Windows 8 appears to be holding the knife.

"At this point, unfortunately, it seems clear that the Windows 8 launch not only failed to provide a positive boost to the PC market, but appears to have slowed the market," said Bob O'Donnell, IDC's vice president of clients and displays, in a statement. He continued:

While some consumers appreciate the new form factors and touch capabilities of Windows 8, the radical changes to the UI, removal of the familiar Start button, and the costs associated with touch have made PCs a less attractive alternative to dedicated tablets and other competitive devices. Microsoft will have to make some very tough decisions moving forward if it wants to help reinvigorate the PC market.

PC shipments fell to 76.2 million units, down from 88.6 million units in the same quarter last year. Sales fell across the board, in all regions, and every single one of the top PC manufacturers saw sales fall — although Lenovo eked out an almost flat trajectory with a shipment decline of only about 5,000 units. HP, Dell, Acer, and Asus all saw shipments decline in double digits. In the United States, lenovo was the only named vendor to enjoy positive growth.

Via email, O'Donnell told me that recent discounts for Windows 8 PCs and tablets in the Windows Store and elsewhere were likely spurred by the low shipment numbers, as I suspected. Microsoft had claimed that the discounts were "seasonal."

Where Do We Go From Here?

"Although the reduction in shipments was not a surprise, the magnitude of the contraction is both surprising and worrisome," David Daoud, IDC research director for its Personal Computing analysis, said in a statement. And the bad news doesn't stop there, he said:

The industry is going through a critical crossroads, and strategic choices will have to be made as to how to compete with the proliferation of alternative devices and remain relevant to the consumer. Vendors will have to revisit their organizational structures and go to market strategies, as well as their supply chain, distribution, and product portfolios in the face of shrinking demand and looming consolidation.

Translation: PC makers are in for a world of hurt. Consolidation is inevitable, and lots of people are going to lose their jobs.

We've known for some time that tablets, phones, and ultraportables like the Google Chromebox are taking an increasing share of user time, attention, dollars, and computing power. But this is a disaster. As Daoud notes, we may see a note of panic begin to creep in to traditional PC vendors. It certainly explains why companies like Hewlett-Packard — still the top PC vendor, by the way — are making Chromebooks. 

Just how did HP fare, anyway? In a word: Awful. Sales fell by 23.7 percent, and Lenovo is within striking distance of becoming the world's largest PC vendor. Lenovo's sales were essentially flat, and HP's market share is 15.7 percent worldwide, with Lenovo at 15.3 percent. Dell's sales plunged 10 percent, Acer's fell a whopping 31.9 percent, and Asus was down 19.2 percent. Acer faces increasing competition in mini notebooks.

Even Apple's U.S. sales were off by 7.5 percent by IDC's reckoning — yet another indication of how bad things are. As if we needed one.

PC makers will be reporting first quarter financial results soon, and traditionally weak second quarter results are only a few months down the road. It's going to be an ugly time for PC hardware makers. Buckle up.

Updated at 3:45pm PT with Gartner results, and again on April 11 at 10:50am PT to clarify Apple's U.S. sales, which declined 7.5% year-over-year in IDC's data.

Image Source: flickr/OpenSkyMedia

Good news for Microsoft: 200 million information workers want Windows tablets, a report from Forrester claimed Monday, quite a few more than the 900,000 Surface RT tablets that IDC estimated have already been sold into the channel.

If Forrester's numbers truly reflect reality, they indicate a huge pent-up demand for the Surface Pro, which goes on sale this month. The report concludes that both Apple and Microsoft will go at each other's throats to win knowledge workers to their respective camps, riding the wave of the Bring Your Own Device (BYOD) trend. And believe it or not, those workers want Windows tablets like the Surface more than they want iPads.

Forrester also concludes that it's probably curtains for BlackBerry, which the research house labels a "fading presence".

The strongest argument for the legitimacy of the data is the sample size of 9,766 information workers that Forrester polled. Typically, market research firms - whether asking questions about technology, political candidates or laundry soap - poll a representative group of respondents and try to extrapolate that data out to the entire population in question, usually Americans or even worldwide users. The larger the sample size, typically, the greater the reliability of the findings.

So what did Forrester's report conclude?

1.) Apple will win the next-gen smartphone war. Today, 92% of desktop PC users run Windows, 87% of notebook users do the same, while Apple powers 58% of the tablets. Android edges Apple in smartphone use, 37% to 34%. But 33% of workers want their next phone to be an iPhone; 22% want an Android phone, and 10% want a Windows phone. Some 7% own a BlackBerry, and apparently those same 7% want another.

2.) Windows tablet demand tops Apple. Easily the biggest surprise of the report. Of those IT workers polled, only 2% own a Windows tablet. But 32% want one. That tops Apple, with just 26% of those polled wanting an iPad and 12% hoping for another Android tablet.

"For CIOs, there are three mandates that arise from this data: 1.) Apple and Android will be major suppliers to the enterprise. 2.) Microsoft has a fighting chance in tablets. 3.) The workplace of the future is multiplatform," Forrester's report claims.

3.) More workers are bringing their own devices to work, and more are paying for them, too. Forrester claims that we haven't yet hit what it calls "peak BYOD." But aleady more than a third of workers who bring smartphones and laptops into the office picked what they wanted, themselves, the report found. About 12% of workers bought (or were forced to buy) their notebooks themselves, and 18% more (or 129 million workers) bought their own phones.

In total, 36% of the knowledge-based workforce is ready and willing to pay for the computer they want, the report found. "We read that result as code for “I’d like a MacBook or iMac, please,” Forrester said.

The report also noted that more and more employees don't mind having their devices managed by their employer. If a worker loses a cell phone, for example, an IT shop that activates a "kill switch" will wipe the user's device. Workers these days are finding that blocking a thief's access to their personal data is as valuable as blocking access to corporate data, the report concluded.

With more and more workers using multiple devices - desktop, notebook, phone and tablet - and IT shops allowing these devices onto the corporate network, Microsoft may be right - the world may indeed want Windows. 

Microsoft Q&A With Tami Reller

That's all certainly good news for Microsoft, but Windows 8's future remains far from certain. In a "question and answer" session with Windows marketing officer Tami Reller published Monday, Reller stuck to the party line about how "more than 60 million licenses" had been sold for Windows 8, "on par with the record-setting pace we saw with Windows 7."

"With Windows 8, we’ve built an OS that scales across the entire segment: tablets, to PCs to everything PCs can become, with one consistent scalable experience," Reller said. "Windows 8 is a big, ambitious change and as I said, we’re only just getting started."

Nothing has changed here. Reller is repeating the same points that she has been hammering for weeks now. Yes, Microsoft delivered solid financial results for the most recent quarter. But persistent questions about Windows 8 demand have lingered, and Forrester's report may have answered some of them. 

For several months now, Microsoft's Surface RT has stood as an example of Microsoft's commitment to the concept of a Windows tablet.

But in the next few weeks, Microsoft will begin shipping the full-fledged Windows 8 version of the device (officially known as Surface with Windows 8 Pro, and priced at $899) offering improved performance as well as full-fledged Windows 8 compatibility and functionality. ReadWrite received a behind-the-scenes look at the new tablet at the 2013 Consumer Electronics Show (CES) in Las Vegas.

(Unfortunately, in a blunder within Microsoft's public relations department, the company told some publications that writing about the hands-on time was embargoed until later this month, and that photos and video were forbidden. Other publications were given free rein - not because of the publications themselves, but from "inconsistencies...as to what was communicated," according to Microsoft officials. The bottom line: I don't have my own photos to back up my comments.)

This Is One Big Tablet

Microsoft began its presentation by holding up both the Windows RT and Windows 8 versions of each tablets, and letting the media compare them. I've called the Surface RT "bulky" before; that tablet measures 10.81 x 6.77 x 0.37 inches, and 1.5 pounds. The Pro version is slightly bigger and thicker (10.81 x 6.81 x 0.53 inches), and officially weighs in at 2.0 pounds; if you want a lightweight, thin tablet, look elsewhere. (Microsoft has published a full list of the Windows 8 Surface's specs here.) 

Microsoft justifies the extra space by including a full-fledged Intel Core i5 processor, essentially making it, in Microsoft's words, an ultrabook with tablet functionality. I wouldn't go quite that far, but the extra performance justifies the slightly heavier weight, in my view. In addition, although both Surface tablets use a 10.6-inch scrteen, the Surface Pro offers a full 1080p display with 1920 x 1080-pixel resolution. Images appeared crisp and clear, and should tempt many away from the 1366 x 768 displays used by other ultrabooks and the Surface RT.

Truly Impressive Screen

While the Surface Pro doesn't come with an external HDMI connection, it does include a miniature DisplayPort adapter, which Microsoft connected to an external 27-inch (or so) monitor. The bright, crisp, colorful elements of Microsoft's Windows 8 user interace popped nicely when blown up large.

For someone who works with text for a living, the digital ink capabilities Microsoft included within the Surface Pro were impressive, with the digitizer reflecting different levels of pressure with lines of varying thickness. The Fresh Paint app, which Microsoft bundles with the tablet, is revelatory: mixing two colors of "paint" together within a digital palette, then painting across a textured canvas, should amaze adults and children alike.

Which Surface To Choose?

In many ways, those are the fundamental differences potential customers will notice when trying to decide between the two Surface tablets. There's a lot to be said for the app compatibility that Windows 8 offers, not only for legacy Windows apps, but also business and corporate applications. Microsoft insists that the majority of Windows 8 apps are being ported to the ARM environment used by Windows RT; color me unconvinced. However, if a corporation is wants to supply employees with a Windows business tablet, I still think that the Surface Pro should be the leading candidate.

On the non business side, many potential buyers may  wonder how the tablet fares with games; Microsoft fired up an over-the-top shooter known as Bulletstorm that looked great. Granted, this was Microsoft's own demonstration room, so that doesn't mean the Surface Pro to run the latest, graphically intensive Crysis games at optimal frame rates. (As an aside, I can't help but wonder if Microsoft might eventually take its SmartGlass technology, combine it with the sort of local processing Nvidia is talking about with its Project Shield demonstration, and let the Xbox 360 or Xbox 720 supplement the tablet's own graphics.) 

I originally worried about how hot the Surface Pro might get under load. After a few minutes of playing with Bulletstorm, the tablet grew warm, but not uncomfortably so. A pair of fans push heat nearly silently out of vents that surround the tablet's outside edge.

Trade-offs Still Part Of The Equation

Unlike Google, whose Nexus line offers everything that's great about the Android platform, Microsoft's Surface strategy still forces trade-offs. Do you want a free, bundled version of Office and a free Xbox Music subscription? Surface RT is for you. Does processor performance, Windows app compatibility and an improved display matter more? Then you'll want to invest in Surface Pro. It's a frustrating dichotomy of choices, especially with the alternatives offered by the other tablet makers and Microsoft's own hardware partners.

Two years ago, I would have found it difficult to believe that I could work professionally without a loud, buzzing PC minitower squatting on the floor next to my desk. I still find myself longing for the comfort of a discrete graphics processor that some vendors include in higher-end notebooks. But the truth of the matter is that the Surface Pro is becoming a viable alternative. It just remains to be seen whether consumers and businesses will want to pay $900 - and up - for it.

Image source: Microsoft.

I can't stop thinking about the iPad Mini. I really, really want to, but I can't. Every time I use my iPhone for something, I wish the screen was twice the size. I think the smartphone might be doomed. A one-hand tablet and a smart watch would be so much better.

Learning To Be Mobile

The smartphone, specifically the 3.5-inch touchscreen phone, was the form factor that changed everything. But now that we're used to touch and voice interfaces and mobile software, we're getting more demanding. We want easy access to the Web and our apps all the time, wherever we are.

Apple was right to halt work on the iPad to finish the iPhone first. We needed to start small to learn to use touch software and hardware. It worked; the rate of smartphone adoption was astronomical, and the rate of tablet adoption has been even faster. We get it now. The mobile applications we use most — messaging, reading, navigation, gaming — can be even better on a larger screen.

The 10-inch tablet was necessary to show that some people don't need a mouse-and-keyboard interface for anything. But tablets of that size are not really mobile devices. They're too heavy to be used one-handed, too big for reading in portrait view, ridiculous for photography, and so on. Full size tablets taught us to use tablet apps, but they were still an incremental step.

Too Many Rectangles

The era we're in now is mobile's awkward adolescence. The Android world is still focusing on 5-inch-ish things that are either huge phones or tiny tablets. They aren't good at being either of those things, but they make one important point: Lots of people don't really want a smartphone and a tablet. They'd rather just have one thing.

But then there's the mini tablet. There's the seven-inch world of Kindle Fires and Nexus 7s, and there's the eight-inch iPad Mini. The early adopters want this to feel right. As Dan Frommer is fond of saying, the iPad Mini feels like the "real iPad." It's big enough for the capabilities of tablet software, but it's small enough for true mobile use. But there's still something missing.

I still need a phone. I still need a thing that deals with voice calls and alerts us to urgent messages. I can't carry an 8-inch tablet in a pocket and whip it out whenever it vibrates. In fact, I don't want the tablet to bother me with all that communication stuff, since I'm using it for concentrating on something. So I still carry a powerful smartphone with a beautiful screen, and that makes buying a small tablet seem frivolous.

Watch This Space

And this morning, as I read a book on my phone on the subway and wished the screen was bigger, I suddenly realized why people are so excited about smart watches like the Pebble. A watch could be a "phone," couldn't it? It could be the device for short communications and reminders that I need to know about right away. And for things that require screen real estate and concentration, I could use a mobile-sized tablet. Then I wouldn't need a phone at all.

It's the phone that's the awkward size. That's the thing I drop all the time. If I had a smart watch and a tablet, I wouldn't need anything in my pocket at all. I know it sounds awkward to do a voice call on a watch, but A) voice calls are inherently awful, and B) it might not be so bad. Imagine if you could snap the device off of the wristband and hold the back of it up to your ear. A good enough microphone could make that work.

Apple is rumored to be building a smart watch (article in Chinese). This rumor says it's a Bluetooth device that connects to the iPhone. It could connect to the iPad just as easily. But it would even make a great standalone device, I say. Voice, text, calendar/reminders, weather, and you're good to go.

The one question is the camera. Do we want to hold up seven- or eight-inch tablets to take photos? Or do we want a sensor on the back of the watch, right next to the earpiece? Photography seems like the one case where a pocket-sized (smartphone sized) computer is the perfect tool for the job. But otherwise, get rid of it. Give me the big screen for thinking and doing, and a tiny one for talking.

One of the biggest questions tech-savvy parents must contend with when it comes to tablets for their kids is this: do I really want to give my precious wee one a really expensive piece metal and glass?

Tech blogger Shelly Palmer asked the same question this holiday season and came up with five good tablet options for kids.

Palmer's picks are pretty good, touching on safe and educational options for younger and older kids alike. I like the fact that he threw out an Android- and an iOS-based device, though I'm not sure that I would have picked a Kindle Fire.

Unless you want to (a) give your child quicker access to a lot of content that will (b) suck your bank account dry, I'd suggest a Nexus tablet instead. You can still get multimedia content if you want it, but from more sources then just Amazon's web store.

I loved Palmer's kid-only choices, but you may want to weigh your own budget needs before getting one of these highly specific devices. As counter-intuitive as it may seem, if you're trying to cut costs for the long term, you may want to buy an Android/iOS device first, rather than a kid device for $99-$199 that they'll outgrow very quickly and you'll have to get a new tablet for anyway.

But if you have a string of little kids in your creche, I would definitely opt for a kid-specific tablet that can be shared and passed along so it will get more than just a year or two of use if you're lucky.

Time's running out, so you'll have to move quick to get a tablet under a holiday tree. But whatever you decide to buy, be sure it exceeds the level of your child's abilities so they'll grow into using the tablet over time, instead of outgrowing it next week.

In a column for PCMag.com, well-known analyst Tim Bajarin argued Monday that Microsoft has "betrayed" its hardware partners with the launch of its Surface tablet, and that it should abandon its infant hardware business. It's a strange, protectionist argument mired in the past. And it's dead wrong.

Bajarin's argument can be summed up like this: After watching Apple and Google control the ecosystem, Microsoft decided to do the same. But by doing so, Microsoft has alienated its partners, who will be less receptive to Microsoft in the future.

To that, I say, so what?

Apple & Google Have Their Own Hardware

Bajarin's first point is obvious, but spot on. Apple first tied together its Macintosh computer and OS with the iPod, then the iPhone and iPad, combining hardware, software (including apps), media, services and a pair of operating systems into a coherent whole. Google approached the problem from another direction, launching a comprehensive suite of services, then adding devices and later media services from Google Play. And Amazon has built out from its media business, tapping into a fork of the Android OS, and designing its own tablet.

Microsoft's been late to this game because of a few factors:

1. It failed to immediately recognize the importance of the Internet.
2. It relied on its hardware partners.
3. The hardware efforts it did pursue, like the Xbox, Zune, and computer mice, were tangential to the PC.

As Bajarin notes, however, the modern ecosystem or computing platform consists of hardware, software, services and media. Microsoft maintained control of the last three, but not the first.

Did Microsoft need to create the Surface? No, it did not. Microsoft's hardware partners are already bashing their brains out to create PCs with sufficient margins to keep them in business. And yes, any Surface tablets that Microsoft sells is likely a sale the partners won't make.

We already know that those partners are unhappy, and it's very possible that Surface could become the most popular Windows tablet simply because of Microsoft's own massive marketing effort, which simply drowns out any promotions by its hardware partners. You do have to feel somewhat sorry for those partners, whose most compelling selling point so far seems to be "We're cheaper than the Surface!"

Here's where I think Bajarin's argument breaks down.

Co-opetition Is Commonplace

In a recent interview with Bloomberg BusinessWeek, Apple chief executive Tim Cook was asked about the disparity between partnering with Samsung, one of Apple's largest component suppliers, and suing Samsung's device business for patent infringement. Cook's response: "It's awkward."

Sure it is. But that's the way business is conducted today. Microsoft needs its manufacturing partners, and they need Microsoft. But that shouldn't stop Microsoft from trying to bash their brains in. Simultaneously cooperating and competing - "co-optition" - is par for the course. Look at Twitter and its apps partners. Ditto for Apple and the developers who occasionally get in Apple's way. An even better example is collaboratively sharing patents among various companies to develop specifications that benefit all of them, like Wi-Fi.

And let's face it - some of those partner's products are crap. They're full of bloatware, they're slow, they use subpar components. Part of the blame lies within the retailer community, which encourages proprietary, low-cost builds that they can use as "doorbuster" promotions. Microsoft's Surface is the "hero" tablet, the premium device that all other Windows tablets should aspire to. And, as we've argued before, that's why Surface carries the "hero" price tag. Even if some Best Buy retailers are inexplicably burying it in the discount section.

But that doesn't mean that Asus, Acer and others are merely carrying water for Microsoft, either. Every manufacturer in the world - including component manufacturers like Super Micro - tries to differentiate themselves to capture more sales and bigger profit margins. In 1989, for example, Asus was founded as a motherboard and card manufacturer. Today, it is the world's fifth-largest PC manufacturer. All of the world's top five PC makers - HP, Lenovo, Dell, Acer and Asus - have expanded into the tablet market; some, like HP and Dell, failed to make their tablets into viable products.

Co-opetition Runs Two Ways

Still, the options are there. HP tried and failed with WebOS; Dell had less success with the free Android OS than some of its competitors. But when each manufacturer expanded into the tablet market, was there any grumbling from Microsoft about raising their Windows license prices, or cutting them off?

Nope. Nothing that leaked out, anyway. Partnering with a company in one area simply does not mean that you have to share common goals in every area, or that you have to do everything in lock step. It's a business deal, and business deals can be "awkward" and still work out to both parties' benefit.

Some companies acquire "personalities" - among them Apple, Google, and Microsoft. Personalities humanize what would otherwise be a collection of employees, products, policies and service contracts. So if a company like Apple were to go out of business, would it be missed? Unquestionably. But would Acer? I doubt it.

This may sound callous, but another faceless offshore supplier would step up. And if the products had the right mix of quality and cost, we'd buy them.

Similarly, if Microsoft went out of business, would Acer fall? Probably not. The company would simply pivot toward Android or some other operating system.

Competition drives innovation. This is one of the fundamental principles of a free market, and one of the central tenets of organizations like the Federal Trade Commission.

Say what you want about Microsoft's Surface tablet itself; there are plenty of criticisms available to choose from, ranging from the price, to the tiny apps store, to the limitations of the Surface RT OS. But to call Microsoft's decision to manufacture the Surface a mistake itself misses the point. 

With the emergence of Windows 8, hardware makers have redoubled their search for the right combination of full-featured laptop and super-portable tablet.

Hewlett-Packard -- like several other manufacturers -- is betting on business laptops that swivel, twist and gyrate to become a reasonable facsimile of a tablet. HP's candidate, the Elitebook Revolve, was announced Wednesday.

In contrast, Microsoft's answer, the upcoming Surface Pro tablet, uses an add-on keyboard cover to help it keep up with laptops. 

It's not clear which approach buyers want, or if they want hybrid devices in the first place. Apple, which created the successful tablet market with the iPad, seems to think that tablets are more like giant smartphones, not slimmed down laptops. And unlike Microsoft, which built Windows 8 to work on both tablets and laptops, Apple uses one operating system for laptops and desktops and another for tablets and smartphones.

It's All About The Hardware

In many ways, it's up to the hardware to determine which approach will work best, so I was happy to spend a few minutes with the Elitebook Revolve.

According to Ajay Gupta, HP's director of commercial notebook products (right), the Revolve is a notebook first, designed to be a knowledge worker's primary computer. It includes just about all the features required in standard notebooks, and works with HP notebook docking stations.

Here are the specs, per HP:

• 11.6-inch, 1366 x 768 Gorilla Glass touchscreen
• Intel Core i3, i5 or i7 processors
• Up to 256GB SSD storage
• All-magnesium chassis, 8.35 inches x 11.22 inches x .8 inch
• About 3 pounds
• Full-sized, backlit, spill-resistant keyboard with bottom-case drain
• Trackpad
• 720P camera
• Optional 4G LTE broadband connectivity
• MicroSD slot, Micro-SIM
• Two USB 3 and DisplayPort, Wi-Fi and near-field-communication connections
• Eight- to 10-hour battery, 210 hours of standby
• Optional pen, with clip
• Fully serviceable drive bays 
• HP enterprise management software

Pivot And Fold

But the specs don't tell the story of the Revolve. The device's entire reason for being is the way the touchscreen pivots and folds, from a normal laptop position, to lay flat over the keyboard, creating a tablet (though one twice as heavy as an iPad). Even cooler, you can stop the transformation half-way, leaving the screen pointed away from the keyboard to get a small presentation device.

It's a pretty slick system, and in the few minutes I got to play with it, the hinges and magnetic clasps worked well and had a reassuring solidity.

Encouraging And Exciting

Personally, I find these new forms arriving in the wake of Windows 8 encouraging and exciting. They'y represent continued innovation, and will hopefully lead to even more-useful designs. The new devices are exciting, because they're new and untested. We don't know how well they will work or whether they will solve problems.

Heck, we're still trying to figure out what those problems might be much less whether they're best addressed with the Revolve or Surface Pro (or, for that matter, hybrids like the Dell XPS 12, Sony Vaio Duo 11 or Lenovo IdeapPad Yoga). Or maybe the need for true Windows compatibility is overblown, and the lighter iPad or Android tablet will do just fine.

In the meantime, I'm thrilled just to see innovative new designs like the Revolve.

I'd be even more thrilled if HP would give some hint about how much its devices will cost when they appear in March.

Top and bottom images courtesy of HP. Other images by Fredric Paul.

In all the competitive battles that have defined the history of the technology revolution, one essential truth almost always determines the outcome: cheap and good enough beats awesome but expensive every time.

It happened when PCs beat out minicomputers (not to mention Macintosh's). It happened when VHS killed Betamax. It happened when Linux pushed aside proprietary server operating systems. It's happening now as Google's Android overtakes Apple's iOS.

Good Enough?

And it could be about to happen again with the Ubislate 7Ci tablet. This Android device is far from special in just about every respect. The specs are ordinary at best:

• 7-inch, 800 x 432 capacitive touchscreen
• Android 4.04 Ice Cream Sandwich
• 1GHz Cortex A8 ARMv7 CPU
• 512MB RAM, 4GB storage
• Wi-Fi (a version with GPRS cellular capability is also available)
• VGA front-facing camera
• Micro SD slot
• Power, micro-USB, and headphone connectors

The speaker is tinny. The pictures are grainy and low-res, and the colors are off, too. The screen has to be held just so to be seen properly. Battery life is listed as a measly 3 hours, and in my tests the device couldn't hold a charge more than a day or two no matter how little it was used. Performance is painfully slow for anyone spoiled by the latest tablets from Apple, Samsung, Microsoft and others. Things that should happen instantly take several seconds or more, and I experienced frequent hangups and glitches. 

But build quality seems solid, and the thing is perfectly portable. Most important, though, it works - and it's being sold for just $20 in India.

Like An iPhone 3GS?

Sample Ubislate photo Professor and entrepreneur Vivek Wadwha, who lent a test unit to ReadWrite for evaluation, compared the Ubislate Ci7 to an Apple iPhone 3GS, and in my tests that feels about right. If you can remember back a few years, you'll recall that when 3GS first came out it felt plenty fast and revolutionary. And I think that's exactly how the Ubislate Ci7would feel to someone getting ahold of their first tablet right now.

But the iPhone 3GS was a hard-to-get, top-of-the-line machine when it debuted in 2009. For the Ubislate, Wadhwa says the Indian government has put in a bulk order for 100,000 devices at $40 each, which it then plans to sell to students in the countryside for $20 each. Wadhwa says they will also be available direct for $60.

It's unclear how or when manufacturer Datawind will be able to deliver on this order, and when or if the tablet will make it to the U.S. and other markets. And it will no doubt cost a lot more on these shores due to testing, taxes and other issues.

Changing The Hardware Market

But even if the Ubislate never achieves mass distribution, in the U.S. or even in India, it's still a game changer - for both hardware makers and Internet companies.

For the hardware market, iIt proves that a workable tablet can be created - if not yet delivered - at a price that makes it attainable to a lot more people than can afford even the cheapest mainstream tablets from Apple or Samsung and their direct competitors.

While people with means will always want the latest and best, the Ubislate is a step toward a world where almost everyone - Wadwha estimates that a billion people could end up with devices like this - has a tablet.

Maybe that tablet is not as good as the one on which you may be reading this article right now, but it's more than good enough to give anyone access to this article - and to the rest of the Internet. And as history has shown over and over again, good enough and dirt cheap will swamp excellent and expensive every time.

Apple has made a lot of money selling tablets for $500 and up, and Microsoft is charging a whopping $900 or more for its upcoming Surface Pro. And I'm not saying those excellent products aren't worth it.

But increasingly, those high-end machines could be competing against "good-enough" competitors that aren't just 10% or 20% cheaper, but an order of magnitude cheaper. That puts a whole new kind of pressure of device makers to justify their high prices.

A Vast New Online Market - And New Competitors

Just as important, though, truly ubiquitous tablets will bring millions - perhaps billions - of new users to the Internet. These new Internet citizens won't be as rich as the first billion people now online, but they will inevitably shift the center of Net away from developed nations.

That will open up vast new markets for Internet companies, if they're clever and fast enough to come up with products and services that meet their needs.

But when the next billion people come online, they're not just going to be consumers. We've already seen that as soon as people get access to the Net, they start figuring out how to leverage it to make life easier for themselves, and creating businesses to do the same for everyone else.

If truly cheap tablets really do double the worldwide Internet population, we're sure to see a huge increase in online entrepreneurs. If you think there's a lot of competition in the online app stores now, what do you think is going to happen when all those smart/ambitious/hungry new developers join the game?

If you don't believe that changes everything, you're just not paying attention.

For more, check out this video of Vivek Wadhwa presenting the $20 tablet at the inaugural ReadWrite Mix event in San Francisco:

Microsoft has priced its Surface Pro Windows 8 tablet, due in January, at about the same level as an ultrabook - only without that pesky keyboard.

In a blog post, Microsoft Surface chief Panos Panay revealed the price: $899 for a Surface Pro with Windows 8 and 64GB of flash storage, and $999 for the 128GB version. That's consistent with what Microsoft indicated at the Surface launch this past summer: that the Surface RT would be priced on par with rival tablets, and that the Surface Pro, which includes an Intel Core processor like the ones used by the majority of PCs and uses a standard version of the Windows 8 operating system, would be priced comparably with an ultrabook.

There's a minor gotcha, though: While each Surface Pro version will include the new Surface Pen stylus, they won't include either a Touch Cover or Type Cover, meaning that users will have to shell out an additional $119 for the Touch Cover or $129 for the Type Cover with the more fully-formed keyboard. Users can also buy (or may already own) a third-party Bluetooth keyboard.

For reference, the Microsoft Surface RT with 32GB of storage without a cover was priced at $499, while adding a Touch Cover bumped it to $599. The 64GB version of the Windows RT Surface, with a black Touch Cover, is $699. That was slightly less the Apple iPad with the Retina Display, which costs $499 for a 16GB version, and $599 for a 32GB model. Both cost more than a number of Android tablets, however.

Surface Pro Is A Keyboard-Less Ultrabook

But when you think about the Surface Pro, you need to think about ultrabooks as much as tablets. From a specifications perspective, the Surface Pro compares well to a notebook: It has a Intel Core i5 processor, which gives a graphics boost to the Surface Pro's 10.6-inch, 16:9 ClearType touchscreen running at 1920 x 1080 resolution. It also includes a Mini DisplayPort to drive an external display up to 2560 x 1440 resolution, plus Bluetooth and a full-size USB 3.0 port.

Oddly enough, the Swedish site Webhallen took a lot of heat earlier this year for publishing what it thought would be the expected price of the Surface Pro: just over $800, with other models priced significantly higher. And you know - it turns out they were right on the money.

"It’s clear with the Surface Pro pricing Microsoft is targeting notebooks, not tablets," Patrick Moorhead, principal analyst with Moor Insights, said in an email to ReadWrite. "Very few people will pay $899 for a tablet but they will for a notebook. The Surface Pro with the Type Cover makes a very nice compact and light solution."

"I’ve given up on having Surface RT compete with an iPad," Moorhead added. "To do that, it would need to be priced at $699.  But it isn’t. Therefore, I am looking at it through the new lens of a notebook. Microsoft won’t sell nearly as many at $899 as they would at $699, and overall, they won’t sell many." 

That means that our earlier analysis is still in play. Sarah Rotman Epps, a consumer and mobile analyst for Forrester Research, said in July that Microsoft could be worried about competing with its manufacturing partners like Asus or Dell. One way to avoid that problem, she said, would be to price the Surface high enough to avoid direct competition.

“Keeping the price point of the Surface high limits the threat to Microsoft’s OEM [original equipment manufacturing] partners,” Rotman Epps said. “At a $1,000 price point, this won’t be a mass market product, but it will still have the desired effect of exciting consumers and inspiring OEMs to do more with hardware design for Windows 8.”

The Case For The Surface Pro

Earlier this year, I made the case for the Surface Pro as the ultimate business tablet. The Surface Pro has little competition in that arena. The iPad is being used in some corporate environments, but what pressure both might have felt from specifically business-oriented products like the Cisco Cius and RIM PlayBook have largely evaporated.

While I didn't know the price at the time, that's largely immaterial: Once you start aligning a product with corporate budgets, products begin to be measured less on price than on feature sets, especially as the value of the employee using it increases. The included digitizer pen will also satisfy content creators and other creative types; the tablet includes a "Palm Block" technology that will allow users to rest their hands on the tablet.

The most important aspect of the Surface Pro is its ability to run Windows; my recent trip to Dubai to explore Windows 8 applications revealed that yes, companies are developing apps for Windows 8, and some are using Windows RT. But it simply costs less to develop an app for one Windows platform, especially where legacy, Windows 7-era apps are involved.

The question, of course, is whether or not Microsoft truly wants to sell its own tablets, clear out space for its hardware partners or essentialy offer another premioum service in the vein of the Microsoft Signature experience, where the company will sell you a notebook free of the third-party bloatware that hardware partners often load.

NPD released some unsettling news on Thursday: Third-party Windows 8 tablets are virtually non-existent at 1% of all retail sales from mid-October to mid-November, and Windows device sales are down 21% overall from a year ago (see Is Windows 8 Winning? Microsoft Say Yes; Data Say No). A super-expensive Surface Pro won't help those numbers. But if companies are looking for a Windows 8 tablet for professional use, the Surface Pro will still likely be their number one choice.

Barnes & Noble and Microsoft have finally delivered a Nook e-reader application for Windows 8 and Windows RT, giving Microsoft's Surface tablet a dedicated bookstore to compete with tablets and e-readers from Apple, Amazon, and Google.

The Nook app is downloadable from the Microsoft Store for Windows 8 and Windows RT, but not Windows Phone. 

The application uses what B&N calls its first implementation of a “paper” interface, with a texture that mimics the look of real paper. (That technique, also called skeuomorphism, had been widely adopted by Apple, which also uses a paper-like background inside its iBooks app.) Both Apple and B&N’s Windows 8 app also use a “bookshelf” motif to display the books and magazines that the user has purchased, although only Apple actually places the books on a simulated shelf.

To date, little has been said about Microsoft’s $300 million investment into Barnes & Noble, which took place last June, to form a subsidiary company that would be jointly owned by both B&N and Microsoft. But the release of the app was signaled months ago.

In September, Barnes & Noble began advertising for a “director of engineering, Windows 8” posting, that would lead the B&N app. 

“As the Barnes & Noble leader of the Microsoft Alliance, you will be responsible delivering on our contractual commitments on Windows 8 applications, Cloud, commerce, content integration with the Microsoft ecosystem and for defining and delivering on product strategy of Nook integration with Microsoft ecosystem including Windows, Office, Bing... You'll lead a cross functional team of engineers in design, development, test, and deployment of a range of products on a Windows mobile 8 platform.”

Lees' Work With Barnes & Noble Is Done

The app’s release also explains why Andy Lees has been named Microsoft’s new head of corporate development and strategy, a post that he assumed a month ago, according to a source close to Microsoft. Lees was originally head of the Windows Phone division, then was shuttled into a separate advisory role by chief executive Steve Ballmer. He then took over the partnership between Barnes & Noble and Microsoft, the source said.

Lees’ new post “had nothing to do with the Sinofsky situation,” the source said, referring to the unexpected departure of Windows chief Steven Sinofsky from Microsoft on Monday. Lees will oversee the corporate strategy team and the corporate development team, with a “holistic approach” to mergers, acquistions and other moves, the source said. 

With a 22-year pedigree at Microsoft, “he knows the products inside and out,” the source said. Lees’ bio has yet to be updated to reflect his new position. 

However, the source also said that it was incorrect to think of the new Nook app as the “culmination” of the partnership between the two companies, although he declined to comment when asked if a co-branded Microsoft Nook Surface tablet was in the works.

Why A Microsoft Nook Tablet Makes Sense

At the end of September, Barnes & Noble announced the 7-inch Nook HD for $199 (8GB) and $229 (16 GB) as well as the 9-inch Nook HD+ for $269 (16GB) and $299 (32GB). Both tablets feature high-resolution screens capable of challenging the updated Amazon Kindle tablet; the Nook HD+ is capable of displaying full 1080p video on its 1920 x 1280 display, versus the 1280x800 HD screen used by the 7-inch Kindle Fire HD. 

A Nook-branded Surface makes sense in that the Windows RT Surface and the Nook share a common ARM architecture. If there’s any drawback to the hardware engineering of either tablet it’s that both have been praised as superlative; it would a difficult decision to favor one design over the other. 

Microsoft’s Surface tablet, meanwhile  is about the size of an iPad, at 10.81 inches × 6.77 inches with a 10.6-inch widescreen display. Some of the online raves in support of the iPad mini and Google's Nexus 7 seem to indicate that full-size Surfaces, iPads and similar tablets might be a little large for e-reading. Some people clearly prefer large tablets. But others seem to prefer a smaller, more manageable device, about the size of the Nook. If a Surface mini is coming to focus on e-reading, why not co-brand it as a Nook?

Why A Microsoft Nook Tablet Is A Bad Idea

The Nook HD’s weakness, if it has one, is that the tablet only has about 10,000 apps, according to a review in the Wall Street Journal. Other reviews have characterized the Nook as a great e-reader tablet, but without the ability to do much more.  

Unfortunately, pairing a Nook tablet with Microsoft’s app ecosystem would, for now, actually restrict the app environment even more. Microsoft has argued before that optimized websites can be used to replace dedicated apps, but that’s a harder case to make against a robust Android or iOS ecosystem. The Microsoft operating system could also be an issue - while iOS and Android straddle both phones and tablets, Microsoft has three OSes for mobile devices: Windows 8, Windows RT and Windows Phone.

Finally, there’s the keyboard. Designing a version of the Touch or Type Cover for a 7-inch tablet would likely prove less of a differentiator and more of a drawback. It just doesn't seem feasible.

The question comes down to this: Has Microsoft's $300 million bought it a Barnes & Noble roadmap onto Microsoft devices? Perhaps, but it's not likely to be B&N's exclusive path. While Apple’s iBooks can be read only on Apple devices, Amazon has done better partly by making its Kindle apps nearly universal. While an optimized e-reader version of the Surface might bring some advantages, don't expect Barnes & Noble to limit its choices.

Lead image source: Flickr/AMagill,

Microsoft is reportedly building its own “Xbox Surface” gaming tablet, which could give the company a true mobile gaming strategy.

Microsoft officials declined to comment, but the rumored 7-inch tablet could incorporate a custom ARM processor as well as “high-bandwidth RAM suitable for gaming tasks,” The Verge reported on Tuesday. In June, the site published what it believed to be the specs of the device, which included 288MB of RLDRAM 2 and a screen resolution of 1280 x 720.

Microsoft is also reportedly considering a Surface phone, according to the rival BGR site. 

If the reports are true, an “Xbox Surface” tablet would give Microsoft something of a head-to-head competitor to the Sony PlayStation Vita and the Nintendo 3DS. Technically, Microsoft already has a mobile gaming platfrom: Windows Phone, which is moving into Windows Phone 8. Games like Dragon’s Blade and Dungeon Stalker take advantage of Windows Phone 7 (and 8), providing the platform with entertainment for Windows Phone users to enjoy on the subway or an airplane. But the quality of the games pales to what Microsoft’s game console, the Xbox 360, offers; gaming sites like PocketGamer usually give short shrift to Microsoft’s phone games. 

Mobile Gaming On The Rise

Statistically, the rise of mobile gaming clearly justifies a Microsoft foray into the market. In September, analyst group NPD (which provides reports ranking the various game consoles and games by unit sales) said that the number of “mobile gamers” climbed 9% from a year ago, to a total of 23%  of the 211.5 million U.S. gamers, or a total of 46.53 million mobile gamers. Since the number of total gamers actually decreased 5%, that means that mobile gamers are growing both in absolute numbers as well as a percentage of the whole.

What NPD doesn’t do - publicly, at least - is break out the numbers for each console. However, a recent report from the Associated Press does a nice snapshot of how console makers are faring. Microsoft, for example, says it shipped 1.7 million Xbox 360 consoles during the latest quarter, down 26% from 2.3 million a year earlier. Sony shipped a total of 3.5 million PlayStation 2 and PlayStation 3 units for the quarter, down from 4.9 million a year ago. And Nintendo said it sold 1.32 million Wiis for the six-month period ending in September, down from 3.35 million a year ago.

The mobile market is a bit more vague. Nintendo didn’t break out its portable shipments, and Sony said it sold 1.6 million portable PlayStation units (possibly including the Vita) versus 1.7 million units a year ago. That probably means that there’s a market opportunity for Microsoft, if it chooses to head down that path.

What Games Would An Xbox Surface Run?

But there's a simple question that hasn’t yet been answered: Would an Xbox Surface tablet actually run Xbox games?Currently, the Xbox 360 is powered by the so-called Xenon chip, a triple-core IBM PowerPC chip. That’s an entirely different architecture than the ARM processor found within the Apple iPhone5 or all Android phones. And that, in turn, means that games written for a custom ARM processor in an Xbox Surface tablet would require a custom port to the tablet by the developer itself. It also means, however, that Windows Phone games should work without too much trouble. Designing a tablet around a custom Intel chip seems to make more sense, as it would likely provide the X86 compatibility needed to run true Windows apps, which have already begun straddling the Xbox console and PC anyway.

An ARM-powered Xbox Surface tablet might resemble the Surface RT: a low-cost, specialized platform that would require custom apps. That doesn’t mean those apps wouldn’t be written, but it would require additional development effort (and most likely financial incentives from Microsoft) to start building an app ecosystem for the Xbox Surface. And would PC-quality games run well on a tablet? Doubtful.

Other Possibilities

There are a couple of other possibilities: Sony recently bought Gaikai, a cloud-gaming company that is being assimilated into the PlayStation space. Microsoft has already announced that its latest Halo 4 offering is being powered by its Azure cloud software; it’s not too far-fetched to think that Microsoft could be planning some form of streamed offering, either using the Xbox 360 console for local processing or going all the way back to its own in-house servers. Either way, that would help Microsoft circumvent the limits of an Xbox Surgace tablet.

This could also simply be a blown-up marketing effort. Both Sony and Microsoft have released “custom” Xbox hardware tied to a specific game; it’s possible that this could simply be an “Xbox” branded Surface tablet with the SmartGlass “second screen” app front and center.

A Microsoft bet on mobile gaming is certainly risky. But as tablets usurp PCs, an Xbox Surface could also be seen as ahead of the curve.

ReadWrite took three of the most powerful new tablets and pitted them against each other via in-depth tests of three crticial areas:

1. User interface.
2. Web browsing (especially how it deals with Flash).
3. Document sharing and printing in an enteprise environment.

Watch the video for insight on which tablet might be right for you - and your company:

For more on the Surface, check out:

Microsoft Surface vs. Apple iPad: Head To Head Comparison [Video]
Microsoft Surface Review: The Best... Something