Inside Microsoft's Brilliant Acquisition of Perceptive Pixel

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Microsoft CEO Steve Ballmer this week announced that the software giant would acquire Perceptive Pixel, Inc. (PPI). Terms of the deal were not disclosed.

PPI is best known as the company that makes those big interactive displays that CNN called its “Magic Wall” in the 2008 presidential race. CNN was also an investor in the privately held company, as was Intel and 3M.

As part of the acquisition, Microsoft also “acquired” multi-touch researcher and PPI founder, Jeff Han, who blew away the TED conference in 2006 with a stunning demo of multi-touch interfaces . (Note that this demo took place almost a year before the first iPhone came on the market.)

The New York-based company is moving its designers to Microsoft’s campus in Silicon Valley, while Han himself is joining the Microsoft mothership in Redmond, Washington.

Does This Make Microsoft a Display Company?

PPI sells hardware. Specifically, multi-touch displays in 27-inch, 55-inch, and 82-inch sizes.

The 82-inch display isn’t cheap, starting at $80,000. The smaller displays are much less expensive, but overall these products are very high-end devices for very deep-pocket customers.

Microsoft says they intend to make this kind of technology much more affordable. But they’re pretty vague about what they mean.

President of the Microsoft Office Division, Kurt DelBene, said that Perceptive Pixel displays “when combined with hardware from our OEMs, will become powerful Windows 8-based PCs.”

Of course, Microsoft has to pay lip service to partners. But it’s also possible that Microsoft will strip PPI for the software and technology, licensing it to Microsoft’s hardware partners and giving the Windows ecosystem a big boost.

The most likely outcome is: all of the above. I think Microsoft will continue selling PPI displays, but also open the APIs and technology to OEM partners building Windows machines.

On the software front, PPI makes an impressive application called Storyboard, which is a kind of multi-touch, multi-user PowerPoint on steroids.

The announcement by Microsoft seemed to focus heavily on the Microsoft Office group, and the benefits thereto. So it’s a safe bet that Storyboard may be integrated with PowerPoint, and that Office apps will get strong multi-touch features.

The company also has APIs that enable software companies to convert existing applications to multi-touch and pressure-sensitive pen input (or both at the same time).

Although Microsoft has developed a lot of multi-touch and gesture-control technology in-house, PPI is also a leader in this field. With that technology come some nice patents, which bolster Microsoft’s kung fu against litigation-happy Apple.

Perceptive Pixel has some great customers, including the Pentagon and many other US government departments, many scientific labs and universities, a lot of media organizations, including all the major US TV networks and many others.

Microsoft Gave Us the Tablet, but Apple Gave Us the Finger

Microsoft was an early proponent of tablets, but using pen rather than finger. Microsoft’s pen-based Tablet PC roundly flopped.

Apple came along years later with tablets, but using touch instead of pen. And Apple succeeded where Microsoft failed.

Microsoft has accepted the desirability of touch interfaces, and has been shipping great products that use them, including Windows Phone and PixelSense, the touch table formerly known as Surface.

They have, however, never give up on pens.

Perceptive Pixel has some very interesting technology, both on the hardware and software sides, which integrates multi-touch finger input with pen input.

Just two months ago, PPI launched their “active stylus” user interface, which enables simultaneous touch and pen input.

The system recognizes and ignores palms, and only responds to fingertips. It’s so sophisticated that you can simultaneously move a sheet of virtual paper with your fingers while you’re writing on it with a pen.

It gets better. The system can accept up to four pen inputs at once, enabling multiple users.

Why This Is a Great Acquisition for Microsoft

Three recent events suggest Microsoft’s strategy for dominating the multi-touch PC of tomorrow.

First, Microsoft announced Windows 8, which is a hybrid desktop and touch-tablet operating system. The company’s Metro UI is optimized for touch, but will be used by Windows 8 customers using mice. That same UI will be used with fingertips on tablets.

Windows 8 suggests that Microsoft intends to aggressively push the Windows world, kicking-and-screaming, into the future of touch.

Second, Microsoft announced Surface, a high-end tablet that was well received by the media when introduced. Surface tells us that Microsoft intends to compete with Apple in the tablet space, even if it has to become a hardware company to do it.

And third, Microsoft acquired Perceptive Pixel, which suggests that Microsoft will attempt to own the big-dollar high end of multi-touch computing in the enterprise, in science and engineering and in government, and work to bring the costs down until those same technologies can be afforded by end users.

And let’s not forget PixelSense, the touch-table technology that Microsoft OEM partner Samsung has been selling to casinos and retails stores since 2007. Vertical applications tend to be boring, but PixelSense has always been exciting.

When you combine all these assets and initiatives, it’s clear that Microsoft has the strongest range of multi-touch technologies in the industry, especially on the high end.

Whether the company can leverage those technologies into a position of market leadership is another issue.

But so far, they’re hitting all the right touch points.