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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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