Question: In June 2012, Microsoft announced Microsoft Surface, a tablet device to compete with the iPad and Kindle. Just another hardware announcement? Not quite. For the first time in Microsoft's 38-year history it decided to manufacture its own hardware (except for keyboards, mice, and the Xbox, that is). Microsoft has been notorious for not manufacturing hardware. In the early PC days, Microsoft expressly left hardware manufacturing to IBM, Compaq, Hewlett-Packard, Dell, and so on. It gained considerable market share over Apple because that decision enabled those powerful companies to succeed in selling Microsoft Windows on their hardware, which in turn set the stage for Microsoft Office. In the 1980s, Bill Gates famously wrote Steve Jobs telling him that he needed to give up hardware and focus on software. But was Steve Jobs right all along?

At the announcement, Steve Ballmer, former Microsoft CEO, indicated there were features that Microsoft could build, or at least build better, if it controlled the hardware. Is owning manufacturing one of the keys for Apple's ability to create such beautiful, easily used, and highly functional devices? Maybe so. Meanwhile, that same month, Google finalized its acquisition of Motorola Mobility, thus becoming a manufacturer of smartphone hardware. Is its manufacture of tablet hardware just around the corner? Or, perhaps by the time you read this, Google will have announced that it is manufacturing its own tablet. (The Nexus 10 is made by Samsung, not Google.) But Google and Microsoft have a problem (or is it an advantage?) that Apple doesn't have: channel conflict. Apple is the only manufacturer of Apple hardware. But numerous companies other than Google make Android phones and tablets, and several companies other than Microsoft make Windows phones and tablets. What happens to those businesses?

Have they been thrown under the technology bus? So now it's a three-way race for market share: Apple far in the lead, Google following up, and Microsoft struggling for footing back in the dust. They're all strong horses; all have deep technical staff, knowledge, patents, and plenty of money. Place your bets now! Form a group as directed by your professor and answer the following questions

1. Update the table on the next page with the latest announcements and data. Go to http://finance.yahoo. com and update the financial data. Add new devices as appropriate. Search the Internet, using terms such as iPhone vs. Android market share to update the market share data.

2. According to the latest data, how has the market share of these three companies changed? Has Apple made continued inroads on Android phones? Has Surface made inroads on the iPad? What's happened to the Kindle? And what about Microsoft's measly 2 percent of the phone market? Has Surface helped? Or has Microsoft finally given up on smartphones?

3. Unlike Apple and Google, Microsoft controls Windows Server, a server operating system. Does that provide an advantage to Microsoft in this race? There are rumors, in fact, that Apple runs Windows Server in its iCloud data center. If true, does it matter?

4. In October 2011, Microsoft purchased Skype. Does Skype contribute to Surface? Can you find announcements that indicate there is some convergence there?

5. Microsoft makes and sells the Xbox with motion-sensing Kinect. Can you envision a way for Microsoft to use either of those to help increase market share of its Surface/ phone devices? If so, what? \

6. Microsoft enjoys incredible success in the PC market, but it has, at least so far, never been able to succeed with a phone, and, as of May 2013, Microsoft Surface does not seem very successful. Christopher Mims thinks it's time for Microsoft to give up on consumers and focus on businesses,3 especially business back-office applications. Do you see any changes in Microsoft strategy since Ballmer's retirement announcement? What do you think Microsoft should do?

7. Suppose your group has $500,000 to invest in AAPL, GOOG, or MSFT. You must put all of it in one stock. Which stock do you choose and why?