Microsoft Makes an Obvious Confession

Microsoft (Nasdaq: MSFT  ) is coming clean. The company is admitting that its hardware partners -- you know, that group responsible for a big chunk of Windows revenue (OEMs were 20% of consolidated revenue last quarter) -- just might not take too kindly to Microsoft's decision to jump into the hardware arena and become a direct competitor.

Initially, CEO Steve Ballmer downplayed this threat at the device's unveiling, saying it was "just a design point" with a "distinct place in what's a broad Windows ecosystem." He continued:

And the importance of the thousands of partners that we have that design and produce Windows computers will not diminish. We have a mutual goal with our OEM partners to bring a diversity of solutions, Windows PCs, phones, tablets, servers to market. And what we seek to have is a spectrum of stunning devices, stunning Windows devices. So, every consumer, every business customer can say, "I have the perfect PC for me." ... We're excited about the work our OEM partners are doing on Windows 8.

Source: All Things D.

That's a hard sell to convince anyone, but it didn't stop Microsoft from trying to save face. Interestingly, Dell (Nasdaq: DELL  ) just announced a handful of new laptops running Red Hat (NYSE: RHT  ) Enterprise Linux as evidence that the PC maker is eyeing other operating systems. Meanwhile, by the looks of it, Microsoft also isn't letting Dell in on the ground floor of Windows RT tablets, even after Hewlett-Packard (NYSE: HPQ  ) is reportedly giving up that seat to focus on Intel-based Windows 8 tablets.

The Redmond giant has been maintaining publicly for weeks that everything will remain copacetic with the OEM status quo.

On the other hand, Microsoft's most recent 10-K is a bit more candid, saying, "In addition, our Surface devices will compete with products made by our OEM partners, which may affect their commitment to our platform."

That's more like it, Mr. Softy.

Google (Nasdaq: GOOG  ) had better be taking notes, too, since it's also now a partner-turned-competitor in the Android tablet market with the Nexus 7. Transitioning from an open model to a less-open model has some unique challenges.

Forget convincing the broader public: Microsoft wasn't even fooling itself.

Windows 8 hopes to be Microsoft's key to mobile victory, but its success remains to be seen. Instead, consider this company that is already banking on mobile device adoption and is also one of Microsoft's key partners. This special free report is absolutely free.