Microsoft became one of the largest technology companies in the world by focusing almost exclusively on software, but the company has increasingly shown a willingness to make its own hardware. In his annual letter to shareholders, made public today, Microsoft CEO Steve Ballmer makes it official, declaring that the company now views itself as a “devices and services company.”

Among other things, the letter makes it clear that the Microsoft Surface and the Xbox will not be the company’s last forays into hardware and device development. That moves the company closer to Apple’s vertically integrated model.

However, Ballmer says the company “will continue to work with a vast ecosystem of partners to deliver a broad spectrum of Windows PCs, tablets and phones.”

He continues …

We do this because our customers want great choices and we believe there is no way one size suits over 1.3 billion Windows users around the world. There will be times when we build specific devices for specific purposes, as we have chosen to do with Xbox and the recently announced Microsoft Surface. In all our work with partners and on our own devices, we will focus relentlessly on delivering delightful, seamless experiences across hardware, software and services. This means as we, with our partners, develop new Windows devices we’ll build in services people want. Further, as we develop and update our consumer services, we’ll do so in ways that take full advantage of hardware advances that complement one another and that unify all the devices people use daily. So right out of the box, a customer will get a stunning device that is connected to unique communications, productivity and entertainment services from Microsoft as well as access to great services and applications from our partners and developers around the world.

That promises to be a tough balance to strike, as evidenced by the reaction to Microsoft Surface from some of the company’s hardware partners. Microsoft’s entry into the hardware market creates new competition for those partners.

Here’s the full text of the letter on Microsoft’s site.

Previously: Microsoft’s board trims Ballmer’s bonus, citing EU browser screwup

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  • Arlington Albertson

    Very interesting. We’ll see if this is a good move, however judging by Apple’s successes, I can hardly see it being a bad move. Personally I think as a corporate IT buyer, it would be a great boon to my purchasing ability to source it all from MS and have support from hardware to software done right there/here. Plus they’ll have better control over things (in particular drivers) which will mean their devices “should” be the smoothest operating.

  • Guest

    I like this move. Kudos to Steve for starting a dramatic reinvention of Microsoft’s public perception from the ground up while retaining its world-leading status in so many categories.

    • Inquiring Minds Want to Know

      Why is a “dramatic reinvention” of MS’s public perception required when he’s been CEO since 2000? Shouldn’t he have avoided the numerous mistakes which collectively buried the company’s reputation along with its market cap and made dramatic change now an existential requirement?

  • guest

    Saying it’s so doesn’t make it so. And based on past performance at least, a formal decision to embrace devices means a collapse of margins.

  • xylittle

    Their market position is eroding rapidly in the areas they talk a lot about. They may pull it off, but they’re fighting for their survival. Their big competitors have as much cash as they do, and they’ve been losing the battle for talent for a long time. Quite a few analysts predict they’ll keep shrinking for years to come, so this is very much a work in progress.

  • Guest

    This seems like a good move if they didn’t get the majority of their revenues from enterprise customers that buy their software. But they do. Does this new focus then mean that all of those enterprise customers should doubt MS’s committment to the MS Software platform and look at other options?
    To me, I think this move only makes sense if MS was broken apart into a Consumer focused company and an enterprise focused company, and then took the devices and services focus for the consumer side.

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