In the larger scheme, Microsoft is committed to the Surface concept because it has committed to a strategic pivot where "devices and services" will replace packaged software as its revenue generator. Minus Surface, Microsoft would have no first-party devices until it wraps up the acquisition of Nokia early next year.
"Our strategy will focus on creating a family of devices and services for individuals and businesses," CEO Steve Ballmer wrote in a memo that outlined the switch. "We will design, create and deliver through us and through third parties a complete family of Windows-powered devices." [emphasis added]
But while it refused to give up, even on Windows RT — which only Microsoft now supports — nor did the company expand the potential market for its tablets with the revamped Surface 2s, analysts argued.
Strategically, Microsoft still considers the Surface as first a PC in disguise, and only second as a tablet. "If you think of the Surface line as creating a continuum of products that spans from tablets to what we historically think of as PCs, Surface in general skews more towards that PC sensibility," said Ross Rubin, founder of Reticle Research and formerly an analyst with the NPD Group. "They probably don't care too much about the iPad market per se, but they do worry about tablets cannibalizing traditional notebooks. And they're certainly not going to be in the $150 commodity product market, the pure consumption market."
Microsoft showed that part of its strategy — which it hewed from before the launch of the first-generation Surface — at the Sept. 24 rollout event, when Panos Panay, the general manager who leads the Surface team, spent considerable time talking up the Surface 2's and Surface Pro 2's productivity and business chops. The former comes with a Windows RT-specific version of Office, including the new addition of Outlook, Microsoft's email client. The latter can run the real Office suite, albeit not one explicitly designed for touch. The unveiling of a $199 docking station, set to ship in early 2014, was another pointer to the it's-an-ultralight-notebook pitch Microsoft's long used.
Rubin saw the Surface Pro 2, and Microsoft's constant drumbeat that the device is actually a top-tier ultralight notebook, as consistent with the company's strategy to press on the enterprise front over the consumer. And for once, it's timing is spot on.
"Microsoft is looking to position its devices in a place where it can ride what it believes will be a rising tide," said Rubin, of a model where tablets are as capable as a dedicated clamshell-style laptop, and can, when the need arises, migrate from mobile to portable to desktop usage cases.
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