Microsoft makes second stab at tablets

TAKE TWO::Analysts are expecting a far superior product to the failed first-generation Surface, which they said was too heavy, too expensive and was missing key features


Mon, Sep 23, 2013 - Page 14

A year after its flubbed tablet introduction, Microsoft is back with a new Surface.

The US tech giant, which has invited media to a launch in New York, is seeking to correct missteps from its first try and gain a foothold in the tablet market dominated by Apple’s iPad and others using the Google Android operating system.

Details of the new device were not known, but many analysts expect a more powerful Surface tablet to help Microsoft build momentum in mobile computing.

Microsoft, which is trying to shift its focus to “devices and services” to better compete with Apple and Google, barely made a dent in the sizzling tablet market since introducing the first-generation Surface in October last year.

The company has not released sales figures, but reported tablet revenues of just US$853 million in the fiscal year ended in June.

Research firm IDC said Microsoft sold 900,000 in the first quarter of the year — a market share of just 1.8 percent — and even fewer in the second quarter. By comparison, Apple sold about 34 million iPads in the first half this year.

Microsoft was forced to take an embarrassing US$900 million writedown for “inventory adjustments” due to weak sales of the new tablet, which has a basic version and a more expensive “Pro” model.

Enderle Group analyst and consultant Rob Enderle said he expects the new tablets to be much improved.

“This new release should be massively better than the first one. The trick will be getting folks to look at the product fresh,” he said.

Enderle said the first version “was too heavy, too expensive and had poor battery life” and the upgraded Surface Pro lacked a key element, the Outlook e-mail program.

Microsoft appears to have fixes these issues and now has a chance to gain some traction with a device that aims to serve as a tablet with some of the functionality of a laptop PC.

The first Surface “was not a complete device” and did not work with many Windows apps, J. Gold Associates analyst Jack Gold said.

Microsoft can succeed with “a reasonably priced and performance-oriented Pro” to appeal to business users, but the company “has to build momentum before Android makes it mostly irrelevant,” Gold said.

Others say that Microsoft’s strategy has become muddled as it tries to gain ground in the “high mobility” computing segment while still serving the hundreds of millions using conventional PCs on the Windows operating system.

Roger Kay at Endpoint Technologies Associates said Microsoft still has a long road to become a meaningful player in mobile computing.

“High mobility and that form factor are up for grabs between Apple and Google and perhaps Microsoft, but Microsoft will be a distant third,” he added.

Microsoft’s best chance in the segment is to build momentum with its acquisition of Nokia’s phone business, and extend that into tablets, Kay said.