steve ballmer

“[I]t’s important to recognize a fundamental shift underway in our business and the areas of technology that we believe will drive the greatest opportunity in the future.”

Microsoft is traditionally a software company, which has dominated the operating system industry for the better part of the 20th century. But with a shift in consumer preference toward mobile devices, Microsoft is changing its strategy, and is gearing for a “fundamental shift,” which developers, users and partners are likely to catch a glimpse of once Microsoft launches Windows 8 later this month.

In his annual letter to shareholderes, CEO Steve Ballmer says there will be such a “fundamental shift” that would essentially mean that Microsoft is getting ready to play hardball in both software and hardware businesses. “There will be times when we build specific devices for specific purposes,” says Ballmer, citing the Xbox 360 and Surface as examples of how the company can closely integrate hardware and software. This was Apple’s formula for success, and it might be Microsoft’s future, too.

Microsoft is also focusing on new form factors “that have increasingly natural ways to use them including touch, gestures and speech.” Sure, touch and speech are not altogether new for the mobile industry. But Microsoft might have a headstart in gestures, with Kinect.

Ballmer’s letter offers the company’s vision for both consumer and enterprise businesses, which means Microsoft still plans to be relevant not only to regular users like us, but also to enterprise, which has been a strong source of revenue, particularly in the office, productivity and collaboration business.

Microsoft’s partners might not exactly be happy, though. The likes of Acer have already cried foul when Microsoft announced the Surface. Suddenly, Microsoft was not only their OS partner, but a competitor as well. The letter suggests seamless user interfaces, in which users can get content from the cloud through their tablets and smartphones and seamlessly switch across devices. Should the likes of Apple and Google be worried that Microsoft’s Windows 8 might suddenly emerge as a significant platform in mobile and cloud-connected devices, as well?

More importantly, what’s in it for us users? Can we expect great devices, great interfaces, and even innovative ways to interact with our devices and the networked world?