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Microsoft Said to Plan Windows Release for Tablets in 2012

Microsoft Corp. (MSFT), the world’s largest software maker, won’t release a competitor to Apple Inc. (AAPL) and Google Inc.’s tablet operating systems until the 2012 back-to- school season, people with knowledge of the plans said.

Public testing of a new version of Windows will begin at the end of this year with partners and customers, said the people, who declined to be identified because the plans haven’t been disclosed publicly.

Microsoft is working to update its Windows 7 operating system with features more tailored to the touch screens, size and battery life of tablet computers to win a place in the surging market for the devices. The longer it takes Microsoft to release its operating system, the more time Apple and Google have to strengthen their hold on the market.

“If 2011 is the year of the tablet wars, Microsoft will be awfully late suiting up for that battle,” said Michael Gartenberg, a New Jersey-based analyst for research firm Gartner Inc. “It’s not a good position to be in.”

A 2012 debut for Microsoft would likely put it up against a third-generation iPad from Apple and second and third versions of devices based on Google’s Android system, Gartenberg said. Hewlett-Packard Co. and Research In Motion Ltd. will probably also release second-generation tablets by then, he said.

Mark Martin, a spokesman for Redmond, Washington-based Microsoft, declined to comment.

Competition Revving Up

Competition among tablet makers is mounting, with more than 100 new designs entering the market this year, according to In- Stat. The market for tablets will grow to 118 million units by 2015, the Scottsdale, Arizona-based consulting firm said in a report yesterday.

Apple introduced its second iPad version this week -- less than a year after the original went on sale. Apple sold 14.8 million units of the first iPad through December.

“Battle lines are being drawn, land is being grabbed, users are being evangelized and spending money,” Gartenberg said.

Timelines for new versions of Windows often shift as the company develops and tests the product. Windows Vista came out more than two years late, while the current version, Windows 7, was a few months early.

In response to the iPad’s popularity, Microsoft said in January it would make a version of the next Windows software that works on ARM Holdings Plc (ARM) technology for the first time.

That technology, the basis of chips made by Qualcomm Inc. (QCOM), Texas Instruments Inc. and Nvidia Corp., dominates smartphones and is in tablets that run Google’s Android operating system. Motorola Mobility Holdings Inc. and Samsung Electronics Co. have used ARM-based chips in tablets to take on the iPad.

PC Forecast

Gartner lowered its forecast yesterday for shipments of personal computers this year, citing higher demand for PC alternatives, such as tablets. Computer makers will ship 387.8 million units this year, an increase of 10.5 percent from last year, Gartner said. That’s down from an earlier projection for a 15.9 percent increase in 2011.

Microsoft’s operating systems power more than 90 percent of the world’s PCs. Apple, meanwhile, has more than 90 percent of the tablet market, Chief Executive Officer Steve Jobs said when he introduced the iPad 2 on March 2.

Microsoft fell 25 cents to $25.95 at 4 p.m. New York time in Nasdaq Stock Market trading. The stock has lost 7 percent this year.

To contact the reporters on this story: Ian King in San Francisco at ianking@bloomberg.net; Dina Bass in Seattle at dbass2@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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