Readers in the UK may be surprised to read - in just about every tech news outlet today - that Microsoft has pulled out of the Wi-Fi hardware market. In fact the software giant was only selling Wi-Fi hardware in the US and only to consumers.

The news marks a significant wobble in the Wi-Fi market though. Microsoft had only been selling Wi-Fi kit since September 2002, and had achieved a very good market share. It had the number two spot in US retail sales in January, but fell back to number four when its 802.11g product was delayed.

Microsoft is no stranger to selling hardware - think mice, keyboards and, of course, the Xbox - and does not usually quit when it is doing well. It is far more likely to continue throwing money at a market until it succeeds (think Xbox, again). In this case, it is abandoning the market when it is doing well - it had rectified the slow arrival of its 802.11g product and was set for more success - and very shortly after major product launches.

The company’s official reason is that the company has done its job in Wi-Fi. Having entered the market to inspire better Wi-Fi equipment, "raising the bar" on security, ease of use and performance, its presence there is no longer required since the success of WPA improved security, and Wi-Fi set-up routines have got better (see Broadcom’s recent announcement, for instance).

Microsoft as a security leader in Wi-Fi may raise eyebrows, but the Wi-Fi products are generally felt to be easy to use and set up.

The most-suggested reasons for the move out are fear of competition, and loss of margins. It is true that Wi-Fi hardware is becoming a commodity with prices falling very rapidly, and that strong Wi-Fi standards mean that it is difficult to distinguish oneself on technical grounds. However, Microsoft’s name would probably have preserved its share there, as the public would expect Microsoft base stations to work well with Microsoft operating systems. Apple’s Airport products sell well in the Macintosh market for this reason, despite a very high price compared with other base stations and little in the way of technical difference.

So is it competition? The competitors most mentioned are Cisco subsidiary Linksys and Netgear. However, the struggle against these would be easier than the one Microsoft is still engaged in for games consoles.

It is possible that the reasoning is more complex. Microosft may have pulled out, not because it was scared of losing to the competition, but of winning.

The Wi-Fi standards may be stable at the moment, but their future is not so clearly defined. While 802.11g is a defined standard, there are several different approaches to faster Wi-Fi including Atheros' Super-G, found in Netgear and others, and Linksys Afterburner (see this feature for a more detailed look). The official 802.11n higher-speed standard is still a long way off.

The market could be about to fragment between different vendors' schemes to improve on the basic standard, a situation which would have suited Microsoft well, providing a perfect position from which to "embrace and extend" the specs, using its muscle to establish its favoured option.

However, this opportunity may actually have been what scared the company off. Such a move would be very likely to cause more problems than it would be worth. It would incur censure from the authorities, and also cause trouble with the company’s partners, including Intel and Cisco, both of whom have their own views on where Wi-Fi should go, and considerably more investment in Wi-Fi hardware.

Weighing in would bring Microsoft trouble, and the only benefit would be a small margin on hardware that is not, in the end, central to what remains the company's main aim - making Windows more usable and saleable

At this stage we can't tell how what would have happened. If a standards battle does break out, what would Microsoft's role have been? It is probably fair to say that one less manipulator in the market may well be a good thing.

Microsoft’s current Wi-Fi equipment will be on sale for a few months more, and will be supported for two years.