Microsoft Surface said to fall short of predictions


Sat, Mar 16, 2013 - Page 13

Microsoft Corp has sold about 1.5 million Surface devices, people with knowledge of the company’s sales said, a slow start in its bid to crack the fast-growing tablet market to make up for slumping personal-computer demand.

Microsoft has sold little more than a million of the Surface RT version and about 400,000 Surface Pros since their debut, according to three people, who asked not to be named because sales have not yet been made public.

The poor reception for Surface, unveiled last year, adds to challenges facing Microsoft’s Windows unit, which brings in a quarter of the company’s revenue. The devices are Microsoft’s first direct attempt to grab a slice of the surging market for tablets, seeking to take on Google Inc and Apple Inc and prove that Windows has a place in a world of touch screens and smartphone applications. That has not happened so far, said Alex Gauna, an analyst at JMP Securities LLC in San Francisco.

By contrast, Apple sold 22.9 million iPads in the quarter that ended in December last year. Worldwide tablet shipments reached 128.3 million units last year, according to market researcher International Data Corp IDC. Apple’s iPad accounted for 51 percent of the market.

Microsoft’s Surface RT, its first-ever computer hardware product, went on sale Oct. 26. The more expensive Surface Pro, which is built on an Intel Corp computer chip and can run older PC software, arrived last month.

While Microsoft’s newest version of its operating system, Windows 8, runs on PCs and tablets from other computer makers, the company decided to gamble on tablets itself, trying to emulate Apple’s and Google’s strategy of delivering their own flagship devices.

For Microsoft, the stakes are high. PC shipments dropped last year for the first time in a decade, and analysts predict that they will fall again this year.

Chipmaker Texas Instruments Inc said last week that the computer market was weaker than the company had expected in January and chip orders related to notebooks have been sluggish.

Hewlett-Packard Co, the world’s largest PC maker, last month said the market deteriorated more than anticipated in its quarter that ended in January, and the company expects the decline to accelerate in the current period.

Microsoft’s Surface is the company’s attempt to showcase the interactive and mobile capabilities of Windows 8. Yet Surface has failed to connect with consumers.

Windows 8 is “awkward” and has not successfully combined the ease of use of a tablet with the capabilities of a PC, Nomura’s Sherlund wrote.

Surface’s appeal has also been hampered by a lack of applications. Microsoft declined to say how many are available for Surface RT, though its apps marketplace has lacked some high-profile offerings, such as a Facebook Inc app. Twitter Inc’s app for Surface was released just this week.

MetroStore Scanner, a Web site that does its own calculation of how many apps are in the Windows store, estimates there are more than 47,000 as of yesterday. There are more than 300,000 apps for iPad.

Microsoft opted to initially sell Surface RT only at its own stores, which numbered just over 60, then expanded to other retailers. That limited availability may also have left the tablet out of the running for some buyers.