Microsoft not too late for tablet party: Citigroup

Microsoft Corp Chief Executive Steve Ballmer shows Slate PCs (from L-R) Archos, Pegatron and Hewlett-Packard during his keynote speech before the 2010 International Consumer Electronics Show (CES) in Las Vegas January 6, 2010.

(Reuters) - Microsoft is still not too late for the tablet party. And with its Next operating system closer than most expect, the software maker could corner meaningful market share in 2013 and beyond, Citigroup said.

Microsoft could bring out a tablet-optimized version of Windows Next OS before it releases a PC version, the brokerage said in a note to clients.

Citigroup analysts expect the beta version of the operating system by September and shipping to start between January 2012 and March 2013.

However, Citigroup was not convinced the product will be a raving success, adding that the overwhelming investor sentiment is Windows Next will not improve Microsoft's position in the consumer devices market.

Consumer PC sales have declined for the last three quarters even as smartphones and tablets have become red hot.

Apple Inc shipped roughly 15 million iPads in 2010, accounting for nearly the total tablet market, Citigroup said.

The analysts said the tablet market has the potential to expand significantly this year, with Apple's release of the iPad 2 in March and a slew of devices running on Google Inc's tablet-optimized Android 3.0 (Honeycomb) OS.

"Microsoft can have a meaningful share of the market in 2013 and beyond. Of course this is dependent upon the company's ability to deliver a competitive operating system on partner hardware that is priced competitively," they said.

Microsoft would have the enterprise market in its favor if tablets pick up with business users, as these customers are accustomed to Windows devices.

The "make or break" element for Microsoft will be the user interface, and the company will have to at least meet the benchmark set by Apple in this.

The analysts said both Google and Microsoft will be competing for attention from the same OEMs, such as HTC Corp, Samsung Electronics Co, Dell Inc, Lenovo Group, LG Electronics, Sony Corp, Acer Inc and Asustek Computer Inc.

Microsoft shares were trading at $24.70 before the bell. They had closed at $24.67 on Thursday on Nasdaq.

(Reporting by Unnikrishnan Nair and Rachana Khanzode in Bangalore; Editing by Joyjeet Das)