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Microsoft steers same strategic course in Surface do-over

Gregg Keizer | Oct. 3, 2013
Isn't budging from strategy to push own devices to business first

Microsoft's refreshed Surface 2 tablets, which the company unveiled last week and will start selling Oct. 22, illustrate that Microsoft has not changed its ongoing strategy in mobile, analysts said.

While some pundits called for Microsoft to radically overhaul the Surface -- which has struggled to the point of a $900 million write-off in July -- Microsoft instead stayed the course.

"They're sticking to their original strategy," said Ezra Gottheil of Technology Business Research, of the new tablets. "This is a reference design to show what can be done with the platform. They're not after a large amount of market share, but simply to show [Windows 8.1] is a viable platform."

On Sept. 24, Microsoft revealed its Surface 2 and Surface Pro 2 tablets -- replacements for 2012's Surface RT and early-2013's Surface Pro -- and trumpeted the new devices as better versions of their predecessors, with faster processors, longer battery life and other, less substantial tweaks. The form factors remained the same -- 10.6-in. screens with a 16:9 aspect ratio that encourages landscape mode use -- as did the prices for the Surface Pro 2.

Microsoft will begin selling the new models in three weeks at prices starting at $449 for the Surface 2 and $899 for the Surface Pro 2. The keyboard covers, which the Redmond, Wash., company aggressively promotes, even struts in its head-to-head comparison advertisements that mock Apple's iPad, remain separate purchases at prices from $79.99.

Even before Microsoft trotted out the Surface 2 tablets and disclosed their prices, bloggers, pundits and analysts had tossed all kinds of unsolicited tablet advice at the company. Among the advice was for Microsoft to slash prices, sell a smaller Surface "Mini," give up on Windows RT and the Surface RT, now called the Surface 2, and even forget tablets entirely because Windows is a distant third in, at best, a two-horse tablet OS race.

Microsoft didn't take those calls.

"They're plugging away," said Patrick Moorhead, principal analyst at Moor Insights & Strategy. "That's what they do. Zune and Xbox lost a ton of money, but they kept plugging away with Xbox to break even today. Sometime that works, like Office and the browser," Moorhead added, diving deep into the past, when Microsoft beat the likes of WordPerfect and Netscape into the ground, "and sometimes that doesn't. Their social endeavors have not."

Microsoft has a reputation for continuing projects and backing strategies after years of failure, hoping to turn a flop into a financial windfall. Bing, for instance, has failed to unseat Google or even threaten Google's majority share in search, even after running through billions of dollars.

There's nothing wrong with sticking to guns, Moorhead said, pointing out Microsoft's successes as well as its failures after stubbornly maintaining a strategy. "But there's a difference between a promise you make and the execution you deliver," he said. "The [Surface] idea is good and makes sense, but it's not been executed well."


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