The pressure is on Microsoft to build a viable Windows 7 tablet, analysts say.
The hits came fast and furious for Microsoft this week. Microsoft's top mobile and gaming executives were ousted in a management shakeup, and rival Apple finally toppled Microsoft as the world's most valuable technology company measured by market capitalization.
Microsoft is still the world's dominant business software vendor, of course, but Apple's success with the iPad and Microsoft's own failures on the tablet computing front have made it "imperative" that Microsoft build a viable Windows 7 tablet, analysts say.
"The future of the operating system" is at stake, according to a report issued Thursday by Forrester analysts.
"Tablets are the next important computing form factor. To keep its products front and center, Microsoft needs a partner to produce a successful Windows tablet that competes with the Apple iPad," Forrester analysts J.P. Gownder and Sarah Rotman Epps write in the report titled "The Windows 7 Tablet Imperative."
"For Microsoft to remain relevant to consumers, it needs to adapt its operating system to new form factors beyond the traditional PC."
Bach and Allard's replacements will report directly to Ballmer, but some observers suggest that "Microsoft's real problem is Ballmer."
The HP tablet failure "is just an early warning signal" for Microsoft, which "must find an OEM partner that can create a killer tablet" to get back on solid ground, Forrester said.
A Windows 7 tablet is crucial for several reasons, the Forrester analysts said.
"Tablets represent a fourth form factor for consumer computing. After desktops, laptops, and netbooks, tablets represent the next wave of mass-market consumer computing devices," Forrester writes. "The iPad sold 1 million units in its first month of release, bolstering the entire category."
A Windows 7 tablet is also necessary because Windows "will soon face greater competition in netbooks," with Google pushing its Chrome operating system as an ideal platform for netbooks, Forrester said.
Microsoft cannot simply slap Windows 7 onto a tablet without optimizing the OS for this new form factor, analysts warned.
The Windows 7 tablet interface should not be identical to the laptop version. Instead, user experience must be simplified and adapted for touchscreen usage. A successful Windows 7 tablet should be priced attractively, at less than $750, or perhaps even under $500, Forrester suggested.
Microsoft learned with Zune "that it can't beat Apple at its own game if Apple makes the rules," Forrester said.
But Microsoft has strengths that it can take advantage of in the tablet market. For example, Microsoft could integrate a Windows 7 tablet with the Xbox 360.
"A Microsoft tablet that synchs with the Xbox 360 - with all the implied benefits, including the Natal [motion control] interface - would be a killer hub for the digital home, enabling back-and-forth streaming of videos and games that one-ups the capabilities of the iPad and makes Microsoft relevant for the next decade," Forrester said.
Follow Jon Brodkin on Twitter: www.twitter.com/jbrodkin