The personal-computer business is at a crossroads, and Microsoft Corp.MSFT +2.21% isn't sitting still.
The software giant is developing a new lineup of its Surface tablets, including a 7-inch version expected to go into mass production later this year, said people familiar with the company's plans.
Chasing the likes of the iPad Mini, Microsoft plans to launch a 7-inch version of its Surface tablet this year. The WSJ’s Yun-hee Kim talks about why the company is jumping into this hot corner of the tablet market.
Microsoft's tablet ambitions, combined with planned price breaks for its flagship software and updates in coming months to its Windows operating software, paint the picture of a company trying to move more quickly than ever to counter urgent threats to its $75 billion software empire.
One person familiar with Microsoft's product plans said the 7-inch tablets weren't part of the company's strategy last year, but Microsoft executives realized they needed a response to the rapidly growing popularity of smaller tablets like Google Inc.'s GOOG +1.61% 7-inch Nexus, which was announced last summer, and the 7.9-inch iPad Mini introduced by Apple Inc. AAPL +2.00% last October.
Bloomberg News
Microsoft Surface tablet computers at a pop-up store in San Francisco last year. The software giant is developing a 7-inch tablet.
Half of the tablet computers shipped in the fourth quarter were smaller than 8 inches, according to research firm IDC.
Microsoft declined to comment.
Microsoft's expanding tablet ambitions comes as sales of desktop and laptop computers are sinking, hurting the company's traditional area of strength. Research firms Gartner Inc. IT +5.73%and IDC on Wednesday said sales of PCs fell by double-digit percentages in the first three months of 2013 compared with a year earlier.
The figures show last October's debut of Windows 8—Microsoft's latest operating software designed to work on touch-screen devices like tablets and on conventional computers controlled by keyboards and mice—hasn't revived sales of personal computers and may be accelerating the decline. IDC blamed consumer confusion about Windows 8 for some of the steep drop in PC sales.
In tablets, Windows 8 also hasn't budged Microsoft's negligible market share as Google's Android and Apple dominate the fast-growing tablet market. So far, Microsoft and its hardware partners haven't pushed Windows 8-powered gadgets smaller than 10-inches—meaning they have missed out on the mini-tablet boom.
Microsoft executives have conceded publicly that consumers want less expensive touch-screen devices than Microsoft and its allies have been able to sell them. To make Windows 8 computing devices more appealing, they are urging a wider variety of touch-screen computers and tablets at a broader range of prices.
Last year, Microsoft made its first foray into homegrown computing devices with its Surface tablet, and company executives have said more devices are in the works, as it makes a shift from a software maker to what Chief Executive Steve Ballmer has called a "devices and services" company.
One culmination of the new strategy for Microsoft is what it calls "Blue"--frequently updated versions of its products including Windows. Microsoft is likely to talk more about Blue starting this summer, including new devices powered by Windows.
The Wall Street Journal previously reported that Microsoft also is planning price breaks for its Windows and Office software as part of a strategy to spur lower-cost touch-screen devices enabled by its Windows software.
Microsoft also is continuing to test its own smartphone, although it isn't clear whether it will bring such a device to market, component suppliers said.
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