Microsoft Corporation (NASDAQ:MSFT) is taking a chance by developing its own tablet computer, the Surface, to compete with its hardware partners who are helping Microsoft put its new Windows 8 operating system out to market this fall. Acer CEO JT Wang has previously expressed grave concern for the overall marketplace of tablets, urging Microsoft to reconsider entering direct competition.
However, another Microsoft Corporation (NASDAQ:MSFT) hardware partner, Lenovo, not only takes a “what, me worry?” attitude toward the Surface, it is seeming to take an almost dismissive stance to the new kid on the tablet block.
“They (Microsoft) are strong in the software, but I don’t believe they can provide the best hardware in the world. Lenovo can,” said Lenovo CEO Yang Yuanqing Thursday. “Although we don’t like Microsoft providing the hardware, but even though they are starting this hardware business, we think for us that just adds one more competitor. … [T]o be frank, we are not that worried about (the Surface). We are still confident in ourselves. We are providing much better hardware than our competitors including Microsoft.”
Is this bravado and bluster just for the shareholders and analysts who heard this on the company’s earning call, or does Yang truly believe this? Of course it’s hard to tell, but Yang was also sure to comment on the value of his company’s partnership with Microsoft Corporation (NASDAQ:MSFT) and how Lenovo will look to exploit the buzz over Windows 8 in its own company: “Microsoft is still our strategy partner. We are very optimistic on the Windows 8 launch so we will fully leverage that to launch our new products,” he said.
It may seem like a reasonable stance – Lenovo has established itself in the computer hardware industry, while Microsoft Corporation (NASDAQ:MSFT) is making its first foray into that realm of computer development. Should a neophyte be expected to make superior hardware more than those with experience? Perhaps hype may speak far louder than reputation or reality, but Microsoft Corporation (NASDAQ:MSFT) is hoping to leverage that hype into its own share of the tablet market – which would be a boon for key investors in Microsoft stock such as hedge funds, like Seth Klarman’s Baupost Group.