Microsoft Debuts Revamped Surface and Surface Pro Tablets

On Monday, September 23, 2013 Microsoft® debuted the Surface 2 and the Surface Pro 2. I like a couple of components about the PR effort on these products:

  1. Nick Wingfield’s article on the New York Times website about these two Microsoft tablets colored the debut as the efforts of an underdog. I came away from a quick read of the article with a notion about Microsoft as a company tenaciously learning from its mistakes, and hard to count out
  2. The feature set of the Surface Pro 2 — Intel® i5 processor, up to 8GBs of RAM, a half a terabyte of flash drive storage and a starter price tag of $899.00 — all add up, for me, into a very formidable competitor to any other tablet on the market, but even Apple’s Airbook!

I’ll be interested to see how the product is covered by Walt Mossberg at AllThingsDigital. If public reception of these new products continues to be somewhat positive, and prominent commentators echo the same points Nick Wingfield expressed in his article, then Microsoft has to benefit. Sales of these products will inevitably have to start benefiting the overall business bottom line, which will certainly be favorable for investors. Of most importance, a revenue base built on hardware from tablets and smart phones (don’t forget the Nokia acquisition) may buttress the balance sheet as they part with the revenues otherwise forthcoming from on premises software sales, now lost to cloud SaaS offers.

The tenacity Nick Wingfield notes in their efforts to succeed in the small, smart, mobile device market with these tablets, leads me to think Microsoft management has posited hardware sales as a critically important component of a complex revenue strategy for the near term future. The objective, I think, will be to fill the gross sales revenue shortfall likely to result from diminishing sales of on premises Office licenses as customers continue to convert over to cloud SaaS alternatives.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2013 All Rights Reserved


High End Tablet Computer Markets Appear to Have Reached a Peak, But Brands Are Still Mixing It Up

On August 5, 2013, IDC released the results of its second quarter, 2013, study of worldwide shipments of tablet computers. The summary depicts a slowdown in sales growth for this type of computer system. Mr. Tom Mainelli, Research Director, Tablets at IDC surmises “‘With no new iPads, the market slowed for many vendors, and that’s likely to continue into the third quarter. However, by the fourth quarter we expect new products from Apple, Amazon, and others to drive impressive growth in the market.'” (quoted from the IDC summary. We have provided a link to the entire summary in this paragraph).

We see something else at work in these numbers. We think the absolute dollar value of markets are approaching a peak for the iPad type of tablet computer. Most of the forward-looking growth for these products must be found in emerging markets where pricing will have to downwardly adjust if sales are to be made.

We see much more potential in the lower end of tablet computers, especially for emerging markets. But even these tablet computers still lack important features required to really open low end markets for substantial purchases. Multi-tasking capabilities are very limited on most tablet computers, substantially diminishing their appeal to consumers looking for a less expensive alternative to desktop and laptop computers. Important compatibility requirements (for example, support for Adobe® Flash) are missing, so consumers must look elsewhere for devices capable of supporting targeted functionality. Unless tablet computer manufacturers start including these features in their products, we think markets will continue to reflect diminishing sales growth.

The IDC summary points to some exceptions to the general sales slowdown, notably for tablets from Lenovo. If the Miix is producing the sales increase, then our thinking is validated. The Miix runs the Windows 8 operating system on an Intel Atom processor. Windows 8 is, we argue, a more secure operating system than its Android peers and, in fact, runs Adobe® Flash.

The same Lenovo story is at work for Acer, which has experienced spectacular sales growth, quarter over quarter. With Microsoft’s own pricing realignment on the Surface RT and Pro tablets, we think Windows 8 will soon reflect a bigger share of the high end tablet market.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2013 All Rights Reserved


Microsoft Looks to be Finding Its Footing with the Surface RT 32GB Tablet

On July 29, 2013, Mary Jo Foley posted an article to ZD Net: Did Walmart just sell out of Microsoft Surface RTs?. We just confirmed this news ourselves with a visit to the Walmart web site.

This is good news for Microsoft®. It may signal a bottom for their efforts to enter the consumer market for mobile devices (at least tablet computers) and a turn towards positive results, especially if other prominent brick and mortar retailers like Best Buy®.

We also liked what we saw of the enterprise business preview of Windows 8.1 released on July 30, 2013.

Perhaps no company is in a better position to speak to the needs of enterprise IT organizations than Microsoft. The preview presented new features of Windows 8.1 specifically designed to provide PC and Network administrators with tools to streamline the task of migrating users to the new platform. Other tools designed to enhance business computing trends — mainly mobility — have been added to the platform.

This marketing collateral speaks at length to the needs of the administrative teams supporting end users. In contrast to the marketing collateral published when Windows 8 was released, the touch feature option is not emphasized. A lengthy section talks about Apps, the Windows Store, and workarounds for organizations looking for other ways to migrate applications to the new platform.

But what about the large installed base of computers with the Windows XP operating system in use at enterprises and comparably sized organizations in the public sector? From what we’ve seen of the documentation on how to upgrade these older systems, there is still too much ambiguity about whether or not existing hardware will or will not support newer operating systems, not to mention Windows 8.1. We aren’t sure Microsoft can do much more to lessen the difficulty of this experience for this portion of its customer base. As well, we aren’t sure the organizations supporting these computers will want to step through the custom installations likely to be required for Windows 7, and, perhaps, 8.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2013 All Rights Reserved