Silicon Insider: Why Touch Screen Is King

May 30, 2008 — -- When it comes to investing in the future of high-tech, I would suggest buying stock in a screen cleaner company.

It's been a slow week for technology news, so most of the attention has focused upon D6 -- the sixth annual All Things Digital Conference being held in Carlsbad, Calif., and hosted by Walter Mossberg and Kara Switzer of The Wall Street Journal.

D6 is rapidly becoming the pre-eminent event for leaders in the tech industry, not least because it's a way to legally cozy up to two of the pre-eminent figures in business journalism without either side being accused of conflict of interest. As such, it has become a very safe venue for companies such as Apple and Microsoft to offer early glimpses of upcoming products.

With Apple staying undercover this year with its new (solar-powered?) iPhone, D6 has turned into a promotional platform for Microsoft, which is desperate to show that it is not as operationally inept and technologically out-of-touch as the world has concluded it is after the endlessly awaited and ultimately disappointing introduction of its Vista operating system.

For all of its geegaws and new market thrusts (remember last year's "table" computer), Microsoft is really a company with just two important products: Windows and Office. They are the company's bread-and-butter, and no matter how many statistics the company hauls out to prove, by sales or units shipped, that Vista is a success -- it was, in fact, a fiasco. The delays in its delivery almost killed the personal computer industry, the finished product proved unreliable (at least that's the public perception -- I, for one, have had no problems) and most of all, at a time when Microsoft was trying to show that it was still a player, still an innovator, Vista was a disappointment: It had far too many shoulda's and oughta's. Microsoft had talked Corvette, but delivered a Caprice.

That makes the next Windows generation -- Windows 7 -- particularly important to Microsoft. Not only does it have to undo some of the PR damage left in the wake of Vista. Just as important, with Bill Gates' pending departure from company operations, Microsoft users (and employees and shareholders) need some evidence that Steve Ballmer can do more than shout and posture. And right now, thanks to Vista and the failed Yahoo takeover, Ballmer's record is looking a little thin on wins.

Thus, Windows 7 -- or at least a first glimpse of one of its features. These previews are a lot like the old Kremlin May Day parades -- analysts would try to figure out the bigger picture by studying the relative positions of the Party leaders on the rostrum and by counting the number of missiles in the parade.

As you've probably read, Microsoft decided to demo the touch-screen feature of Windows 7. Does this mean that Microsoft believes this is the most important new feature in Windows 7? Or the coolest and most visually interesting? Or is it just the one app the company got done in time and decided to use it as the synecdoche for all of the cool new features we'll see when Windows 7 is finally shipped in 2009 -- or, if Vista is any precedent -- 2011.

So, putting aside all the usual humbug, what conclusions can we tease out of what we've now seen of Windows 7? (And don't say you don't care: even if you use a Mac, you have to accept that Windows holds a near monopoly on the personal computing world and thus, like it or not, sets the pace -- or the limiter -- on the entire electronics world.)

Microsoft is scared of Apple. It's pretty sad that the hottest new feature you have on your most important new product is old news, introduced a year ago by your smaller, but much sexier, competitor. Sure, Apple doesn't offer iPhone touch technology on its Macs -- yet. But doing so would probably take a long weekend … and you can be sure Apple's OS will have it and be shipping long before Windows 7.

Microsoft is even more scared of "Not" -- It's pretty obvious to everyone that the future of consumer tech is not PCs but Third Screen -- mobile phones, handhelds, etc. And as all of those sore-thumbed Blackberry owners will tell you, the biggest challenge in Third Screen, especially as the Web moves onto it, is data input. Tiny keyboards won't cut it for long -- and until somebody comes up with something better -- input is going to have to be touch and slide.

The iPhone pointed the way in a big way (though its zero tactile feedback keyboard is a deal-breaker to us writers), and the entire wireless world seems to be moving in that direction. Microsoft's problem is that a lot of folks are realizing that in a wireless world with a graphical, touch interface, you don't really need an old-fashioned computer operating system … and as a result, a host of new companies have sprung up offering non-OS alternatives to things like file-sharing. This hits Microsoft right at the very heart of its business. This is one competitive battle it simply cannot lose.

Microsoft is running out of time -- Showing off Windows 7 so soon on the heels of the late arrival of Vista (and thus risking cannibalizing sales of the early OS -- I'll bet HP, Dell and all of the other PC makers are real happy about this) underscores the catastrophe of Vista and the recognition by Ballmer and the company that they don't have time to milk every penny of profit out of the earlier operating system. They've got to make their move now: plant their flag in touch screen wireless, shore up the sinking loyalty to Windows, and show they've still got the chops to compete against Apple and all of the young up-and-comers. If Windows 7 (or the later wireless version) slips more than about six months, you can't help thinking that Microsoft might be in real trouble. The days when the Boys of Redmond had no viable competition are long gone.

Touch screens are the future -- like 'em or not (and I hated the old HP touch screen computers). Market forces and Steve Jobs have made them the Next Big Thing. That means dirty screens (to the horror of cleanliness freaks like Henry Blodget), taking your hands off the keyboard (anathema to touch typists), and a whole lot of waving and wrist flicking. Goodbye carpal tunnel, hello torn rotator cuff.

We've seen the future of tech, and it is the consumer electronics industry giving us the finger. In the case of Microsoft, that won't be anything new.

This is the opinion of the columnist, and in no way reflects the opinion of ABC News.

Michael S. Malone is one of the nation's best-known technology writers. He has covered Silicon Valley and high-tech for more than 25 years, beginning with the San Jose Mercury News, as the nation's first daily high-tech reporter. His articles and editorials have appeared in such publications as The Wall Street Journal, the Economist and Fortune, and for two years he was a columnist for The New York Times. He was editor of Forbes ASAP, the world's largest-circulation business-tech magazine, at the height of the dot-com boom. Malone is the author or co-author of a dozen books, notably the best-selling "Virtual Corporation." Malone has also hosted three public television interview series, and most recently co-produced the celebrated PBS miniseries on social entrepreneurs, "The New Heroes." He has been the ABCNEWS.com "Silicon Insider" columnist since 2000.