Microsoft's Bumbled Surface Strategy Generated Just $853 Million in Revenue

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Renegade Knight

The RT isn't broken. It can stand against iPad and Android tablets just fine. However it can't stand against Windows 8. If I'm going to get another tablet I'm going to get a real Windows tablet.

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Eoraptor

Pretty much what everyone else says... it wasn't the surface that was the problem, it was the OS (which their hardware partners and beta testers ALL told them). Apple quite happily sells its ipads at this price and people are willing to make the sale, but people got their hands on windows 8 and windows rt and said "at this price? thanks but no thanks I'm not a masochist"

also what everyone else says, Balmer and the other honchos in redmond need to go if microsoft hopes to ever be relevant again. the pax microsoftia is over, and microsoft now has to actually compete with other companies, not merely steam roller them and expect people to take it.

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theplustwo

They made too many Surface RTs and set the initial price point too high. They're encroaching on an established market (of iPads and Android tablets), so it makes sense to take a loss on their first generation in order to get a foothold, which is exactly what they did with XBox (which, to my knowledge, has basically never turned a profit on hardware sales).

The real goal with the Surface RT is not to make money on the hardware, but to get the Windows RT OS into people's hands in order to drive the WinRT application ecosystem. The only real mistakes they made were overestimating the demand for Surface RT at a $500 price point, and not openly stating their expectation to take a loss on this first generation from the get-go.

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Neufeldt2002

.

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jgottberg

I have an RT (provided by work) and as far as I'm concerned, MS did a great job on the hardware. The performance is great, battery life is still great, the display is fine and responsive to touch... The only thing hardware-wise that sucks is the speaker. It's not loud enough and distorts at full volume.

Having said all that, the problem isn't with the hardware. It's with the RT version of Windows 8. They hampered it so severely for remote access (absolutely NO VPN clients - Cisco, Juniper, Aventail), it's not even usable as a work tool. By alienating the RT from the corporate crowd, they lopped off a ton of sales right there. I'm going to wager that the Surface Pro does better sales-wise.

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radioman70

You hit the nail on the head. I have a friend in corporate IT, and they are full surface pro. The office suite tools are nice and seamless. I have an RT and it is a nice machine, save the speaker restrictions. My choice came down to a full USB and storage for the price.

Hardware is a small cost(relative)to create a future income stream that will continue to serve Microsoft for years to come. If they had priced the tabs appropriately and marketed it right, they wouldn't be in this situation right now. It doesn't help that the reviewers automatically compared it to the iPad, which had years of build out on it's apps.

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Morete

Microsoft got jealous of Apple and tried to be them. Instead of being trend followers they need to be trend setters. But most of all, they need to go back to their grass roots and quit abandoning their successful products. The paradox is that Microsoft doesn’t answer to consumers. It can’t. They aren’t the ones who pay the bills. Microsoft’s principle customers, by a wide, wide margin, are corporations, enterprises, governments, schools, computer makers, and other big accounts that engage in high-volume licensing for Microsoft products. Everything else is just a nice side-dish for Microsoft, including its efforts to make products and services for everyday people. The reason for even having and spending money on the consumer side is just to market the MS name and really nothing else, win or lose.

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Renegade Knight

Apple is in the Apps, Ads, and Content business now. It makes hardware to do that.
Google is in the Apps, Ads, and Content business now. It's started to make hardware to do that and also allows others to use it's OS for no charge.
Microsoft is in the Aps, Ads, and Content business now. It's realized it can't rely on it's OEMs to make hardware that takes full advantage of it's OS (which it also sells) to keep it's OS attractive and so it's started to make it's own hardware.

Microsofts mistake isn't competing against Apple or Google. They are all after the same market.

The market is the consumer and corporations are an add on these days.

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fung0

Precisely. Microsoft's fatal mistake was in trying to compete with Apple, instead of Google.

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Dexter243

did MS hire GM executive's ?

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Belboz99

Ballmer needs to figure out that the best way to "restructure" Microsoft's upper-management is to GTFO, exit stage left.

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DeltaFIVEengineer

Hopefully this will be a big straw that helps break the camel's back and gets Ballmer out the door. MS needs a serious shake up at the top of the food chain in order for consumer confidence to come back.

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Scatter

I never cared for the term "consumer confidence". My decision to not purchase on of these had nothing to do with my confidence in the company. It had to do with my having no interest in the product itself.

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Eoraptor

but conversely, how much more likely are you to buy a another "Microsoft" computer device? that's where the consumer confidence comes in. it's about people who buy one brand over another based on past experiences. its why some people buy razer and asus, and others steer clear of acer or dell.

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Renegade Knight

Interesting question. I didn't buy an RT because I have no use for it. Not a Toshiba version, not a Samsung version not a Microsoft version.

The Surface Pro I do like. I've been waiting for a few things. Haswell. Graphics, and use replicable battery, and SSD. The RT is as restricted as my Android. Thus no reason to upgrade to it from my Android tablet.

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boidsonly

And now M$ has convinced Nokia to go down with them via their upcoming RT tablet...

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fuzz_64

Something that's confusing me... is this ALL Surface models or just the RT's? If it's all, why is the average price $500?

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RandomInt

Million. $853 million, not $853.

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Geiger

Microsoft should leverage all this unused inventory. When HP decided to stop making the Touchpad, the announced they were going to sell them all for $100. Everybody RUSHED to buy one. If I was Microsoft and serious about that, I would sell them all at a big loss to get them in the hands of everybody. It has more of a chance to work than letting them depreciate in a warehouse.

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Zanshi

Keep in mind, you're talking about the same Microsoft that decided it would be fun to almost completely reinvent the wheel on a non-touch PC. Common sense is lacking in Redmond the past few years.

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Renegade Knight

And now we are seeing touch laptops and PCs.

Microsoft saw the future clearly.

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kyle.jankowski

It felt to me that the largest contributor to this loss is the RT. If I had the money to do it, I would buy a surface pro! It feels and acts like a great tablet with a desktop OS, perfect for many things. If anything the RT is the only one that truly flopped. That and the hardware partners were pissing and moaning because they would loose market share.

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fung0

The Surface Pro is indeed a "perfect" device... for nobody. It's way too heavy to compete with Apple or Android tablets. It's too awkward to compete with ultrabooks. Its touch interface is too non-traditional to attract users of Windows, or Android, or iOS.

So who does that leave? Just you, Kyle! Too bad you can't afford even one Surface Pro, let alone the millions that Microsoft needs to move in order to stay afloat.

Seriously, I'm not saying the Surface Pro - or RT - are terrible devices. I've tried both, and I didn't hate them. They're just not quite good enough at anything that I'd ever choose to spend my money on them instead of some other device. The rest of the world seems to agree...

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jason2393

"Generated Just $853 in Revenue" made me think MS had sold less than two Surfaces... I knew they were giving quite a few of them away, but geez...

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PhaQue

Maybe MS can offer some type of free upgrade that lets users run Android OS on it :)

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jgottberg

I'd be all over that. At least I'd be able to install a VPN client.

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pastorbob

+1