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Could a Smart Watch Derail Microsoft's Focus?

Tuesday - 7/16/2013, 2:30pm  ET

The smart watch rumors got a little more fuel on the fire today with reports that Microsoft has a prototype smart watch in the works. It's not surprising that the company would want to work on such a device -- considering that everyone in the tech world seems to be doing it -- but could such a device distract Microsoft from its other products?

Right on time
If a Microsoft watch is in the works, the company should be commended for keeping up with the tech Joneses. Microsoft fell behind in the tablet and smartphone markets, so keeping up with rumored Apple, Intel, and Samsung smart watches shows the company doesn't want to risk falling behind again.

But, a more important aspect of a possible Surface watch is that it fits into Microsoft's recent restructuring announcement last week. Microsoft's CEO, Steve Ballmer, put an emphasis on the company's new engineering divisions, and on collaborating between divisions, in his recent statement -- and, according to The Verge, Xbox engineers are working on the aesthetics of the device. 

A design by Xbox engineers, paired with an OS from Windows Phone programmers, would be a great step in collaborating for the good of the company's ecosystem. Microsoft needs to bring its tablets, PCs, phones, and other devices into one integrated system, and a smart watch could be a big part of that. As Ballmer stated in his memo last week, "One Microsoft all of the time." A smart watch that, in theory, could integrate with a user's Windows Phone, Surface tablet, Xbox, and Windows 8 PC, would certainly fit Ballmer's new mantra.

Not-so-smart move
There's another side to a potential Surface watch though -- distraction. Microsoft was No. 5 in the top five-vendor list for tablet shipments in the first quarter of this year. The company is also a very distant third in the smartphone OS market with just 3% of the market share. These aren't nails in the coffin for a Microsoft smart watch, but they could pose a problem.

The company needs to make a few products really well, before they try and sell new devices in new markets. If customers aren't buying Surface tablets and Windows Phone devices, then the likelihood of them wanting a Surface watch are much lower. Microsoft needs to focus its attention on evolving the Windows mobile platform into an OS that users and developers desperately want. Even Apple faces major pressure, as Android continues to dominate the worldwide market, so if Microsoft puts too much attention on a smart watch, it could turn out to be a major distraction for the company.

Wary of wearable
I've written before about my skepticism that the mass market is ready for wearable tech. I believe that it's part of mobile's future, but so far, wearables have only fit into niche categories, and tech like Google Glass has received a lot of public pushback. I don't think it means that wearable technology won't take off, but Microsoft may be wasting some of its time if it thinks a Surface smart watch will bring significant dollars to its bottom line. Apple is in a much better position to launch a watch, and I'm doubtful even that company can pull it off.

There's no doubt Microsoft knows it needs to keep up with Apple and others in the fast-approaching wearable industry. But wearable isn't the only thing Microsoft and other tech companies will be battling over. The Redmond company and four other major players are in hight-stakes war – and only one can come out on top. Find out "Who Will Win the War Between the 5 Biggest Tech Stocks?" in The Motley Fool's latest free report. Click here to get free access now.

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