Microsoft and Google First Party Hardware

On October 4th, Google is having an event, likely to launch both the Home, their Amazon Alexa competitor, as well as their own branded smartphone. It is safe to assume at this point that Google is getting more and more serious about Google-branded hardware in a number of categories.

Google’s efforts remind me of Microsoft’s as Microsoft has been making their own hardware like the Surface for a number of years now and is a serious contender and competitor in the PC and tablet category.

I feel it is worth taking a step back and making the observation that we have two companies whose very essence, from a computing platform viewpoint, was providing software for anyone to run on their hardware. For Microsoft, this was Windows and for Google it was Android. So why do two mostly software companies feel it is important to become a contender in hardware and compete with their customers and partners? The answer, in my opinion, is brand.

I believe, both Microsoft and Google believe their brand is strong enough to bring hardware to market and take share at a point in time when many markets are consolidating around hardware companies with strong global brands.

We are at a tipping point where PCs, tablets, and smartphones are seeing the percentage of white box, or no-name branded devices shrinking as a total of the segments sales. Consumers are less frequently buying the cheap, no-name brand and, instead, buying the brand that stands for quality and is worth investing in. This is as sure a sign as any of a market that is maturing and globally, we are seeing it take place, even in markets which we used to consider “developing.”

I’ve written frequently that I’m convinced brands will win the day in the global consumer electronics market. We are in the midst of a brand battle to see who is left standing. Many names we recognize making consumer hardware today may not be around in five years. Names like Xiaomi, Oppo, Asus, Acer, Micromax, etc. Or, if they are still around, they may pivot to be out of the large volume consumer categories and just operate in the fringe categories where they may be better suited to compete.

To see where we may be headed, just look around at any other non-tech consumer categories. Look at cars, fashion, consumer packed goods, even restaurants the masses frequent. The mainstream consumer buys from brands they recognize. Becoming a recognizable consumer brand is very difficult and out of many companies with a recognizable brand in tech, Microsoft and Google have a better brand than many of their partners and customers both globally and regionally.

For that reason, I am not going to write off either Google or Microsoft’s first party hardware efforts. It may be a rocky road and they may not get it right at first but, as they learn by shipping, they will remain well positioned as long as they are strategic about the categories they pick. For example, it makes sense tactically that Microsoft makes PCs but not smartphones that run Windows. Similarly, it makes sense that Google does not make PCs that run Windows or Android but instead, focuses on smartphones and perhaps the broader smart home. Being smart about which categories to enter and which ones to not enter, is key for any technology brand.

We will see what Google has up their sleeve and if we need to take them seriously. But I believe they have the type of brand which can make a go at hardware in a number of categories. Microsoft, similarly, is gaining share in the PC/Tablet category and, with another fall hardware event rumored, I firmly believe they are keeping their foot on the Surface gas pedal for good reason.

I can make a strong case that both these companies have a bright hardware future in front of them with brand being a strong contributor to the upside. While it is still early in many markets like AI, AR/VR, etc., I still maintain the stronger brands will win the day.