With the cost of mainstream software increasingly heading downwards, they can't compete by selling an OS or licensing at high dollar amounts. Who wants to spend tens of thousands getting a start-up business rolling when all you need is a few tablets, Google drive, and some free collaboration apps? We're nearing the end of the PC era and taking a quick leap into the mobile era. If Apple and Google/Android OEM marketing teams have anything to say about it, iOS and Android do have a place in business, and those businesses are seemingly ready to adopt these new technologies and move away from the conventional PC market. Surface, for this reason, is the way Microsoft will be able to compete in this new environment, while maintaining an existing user base that wants backwards compatibility with new-age, mobile, touch-based technology. So yes, going forward Microsoft is making the smart decision to become a device and services company. Don't forget that it IS their software on the devices, so that doesn't negate the fact that they do, in fact, still create software (they're not an OEM after-all). Microsoft simply would not be able to compete 5-10 years from now relying on the marketing teams of PC/laptop OEMs to sell things that have long been adopted, but also highly criticized. It makes much more sense to bring the Microsoft experience the Microsoft way, very much like iOS has been for Apple. tldr; Surface is a smart introduction to the new Microsoft experience in this new market of mobile, touch screen devices. They're still making the software for their new devices. They're offering innovative services and solutions for the market which work in mobile environments. It's the only way they can maintain their existing user base and adopt the users of the future. Microsoft can't let Apple or Unix based OS's dominate this new market first, otherwise it WILL be the end of them. Think 5-10 years from now, not 5-10 years ago.