The Move to Vertical Product Integration: Can Microsoft Succeed Here, Too?

It’s been my experience that Microsoft has had mixed success in the realm of hardware. Perhaps they will have the kind of luck with Zune that they have had with the Xbox?

Consider the latest news from Microsoft: The company is busy creating a music player and service, dubbed “Zune,” to compete with Apple Computer’s iPod, and on August 17 signed up EMI Group as a music video partner. The company’s Xbox is a money-losing venture, but remains a hit with gamers. Meanwhile, Microsoft is offering PC makers design kits so they can dress up their computers to match the company’s new Vista operating system due in early 2007.
The common thread: Microsoft, well known as a software giant, is increasingly dabbling in hardware and playing a bigger role in product design. The big question is: Why? While some analysts dismiss Microsoft’s efforts as Apple envy, experts at Wharton say there is a bigger picture. Microsoft wants more control over integrating its software with the gadgets that could open new markets. Its real mission: Find new vertical markets to dominate so it can continue to grow even if its Windows monopoly erodes…. Source: knowledge.wharton.upenn.edu