Homeless in Vancouver: Microsoft’s Surface tablet simply isn’t selling

There were stories last year describing how Microsoft’s Surface RT tablets were piling up in warehouses for lack of buyers.

Now, according to a story in the Guardian, Microsoft has revealed in a filing to a U.S. regulator they are taking a loss on every Surface tablet they do sell.

According to revenue figures submitted by Microsoft to the U.S. Securities and Exchange Commission covering a nine month period up to March 2014, the company’s total revenues from  the Surface were US$1.8 billion but the cost of that revenue was $2.1 billion, meaning it had to spend $116 to get $100 of revenue.

If you can’t think of anything good to say…

Microsoft has not released figures on how many Surface tables have been sold. Estimates for the first eight months of 2013, also based on an analysis of a Microsoft filing with the SEC were for sales of only 1,7 million units.

Apple sold 14.6 million iPads just in the three months of the second quarter of 2013 alone and Android tablet sales were even higher than that.

Can you repeat the question?

The Surface tablet was Microsoft’s belated response to the explosive popularity of tablet computing, led by Apple’s iPad but increasingly dominated by cheap Android tablets.

The Surface, introduced in October 2012, two months after Windows 8, was made for the new touch-centric OS and vice versa. Together they would answer the skeptics who questioned whether Windows could be adapted to post-desktop touchscreen computing or if Microsoft even remembered how to compete.

Microsoft delivers the goods and the bad

The Surface is available in both low- and high-end configurations.

The Surface RT is aimed against iPads, Android tablets, and Chromebooks. It features an ARM processor, 32GB solid state storage, 2GB of RAM, and it runs a cut-down version of Windows 8.

The RT shows the disadvantage Microsoft has competing against the inexpensive tablets and “thin clients” such as Google’s Chromebook. At $450, the RT is $100 more than a comparable Chromebook.

Putting the Windows logo on the Surface RT probably costs Microsoft nearly as much it costs another company to manufacture an entire Android tablet.

It’s not surprising the overpriced and underpowered Surface RT isn’t flying off the shelves, but the Surface Pro is a different matter. It’s more than competitive in its class—both in terms of features and price—ecause the Pro has a cover that doubles as a keyboard it is termed a hybrid or an “ultrabook”.

Chip maker Intel is credited with defining the Ultrabook category in 2012: tabletlike laptops or laptoplike tablets with thin and light form factors, solid state storage and long battery life.

In fact, the first ultrabook to come to market was Apple’s MacBook Air in 2009 and the Air still owns the category

Below the Surface, it’s a desktop computer

The base model Surface Pro features a Intel Core i5 processor, 4GB of RAM and 128GB of solid state storage. It has a full-size USB 3.0 port, a micro SDXC card slot, a mini DisplayPort, and a charging port. In Canada, it costs $999.

The Surface Pro is not a tablet in the mold of an iPad. It’s a real desktop computer with real processing power and real ports in the form-factor of a light, responsive, touchscreen tablet.

It comes with Windows 8 installed but because it’s running an Intel processor you can theoretically install other X86 operating systems such as Ubuntu Linux (if you’re an adventurous and patient gear head).

Interestingly no one has successfully installed Windows 7, which has multi-touch support.

The Surface Pro is in fact the Windows tablet that Bill Gates championed—notably at the beginning of the 21st century but also way the heck back in 1991!

PC makers tried repeatedly but they never could figure out how to pack a whole desktop computer into a thin, light, tablet form factor.

With the successful iPad, Apple didn’t even try. Microsoft finally had to make it themselves.

I like to think there was a moment when then-CEO Steve Ballmer presented the first production model of a Surface Pro to his long-time friend Bill Gates. Perhaps with a little apology as he handed it over: “Sorry it took so long.”

The Surface Pro is a good piece of hardware, operating system aside. Unfortunately it’s probably at least five years too late to market.

Too much too late

In the mind of Ballmer, the logic of the Surface tablet must have seemed inescapable: consumers wanted tablets and most consumers were Windows users, so a touchscreen tablet running Windows was a no-brainer. The Surface running Windows 8 would kick Apple’s iPad to the curb!

Didn’t happen.

It’s easy to blame the failure of the Surface Pro on the albatross of Windows 8, but I believe the Surface deserves some of the blame for being too good a computer.

More is better versus less is enough

With the Surface Pro, Microsoft may have fulfilled a long time dream shared by the computer industry: sticking all the power and complexity of a full desktop computer inside a tablet but apparently that’s no longer a dream shared by a majority of consumers—if it ever was.

Are consumers snapping up iPads and Android just tablets because they’re cheaper than laptops? Or are consumers also deeply attracted to the lack of unnecessary features and uncluttered simplicity that defines the iOS and Android touch operating systems?

Are they saying “No” to the bloat of desktop operating systems because they finally have a choice?

Are we seeing another “MP3 moment”?

Remember how MP3 files became instantly popular? They finally freed consumers from the album model: 10 songs whether you wanted them all or not.

MP3s gave people the ability to have the songs they liked and wanted. People didn’t seem to notice or care that audio quality of MP3 files was crap compared to CDs and LPs. Turns out the music industry’s preoccupation with—and endless promotion of—high fidelity had gone in one ear and out the other so far as consumers were concerned.

Are simple tablets computers doing a similar thing—freeing consumers from the desktop model of computing?

How tablets are rewriting GUI history

Desktop graphical user interfaces (GUIs) have evolved from single-tasking one application at a time in full screen windows with big, chunky controls. Today the controls are fine-grained and often context sensitive; windows are scalable and the only limit on the number of applications you can run is your RAM.

There’s usually at least two or three ways to accomplish anything: menu ways, left- and right-click ways, keyboard shortcut ways. Way too many ways?

Tablets, as re-envisioned by the iPad, are different. They have effectively rolled back the clock on interface design. They make a virtue of big, clunky controls, fixed full-screen windows; one app at a time—tablets are 1985 all over again!

Windows 8 or Windows 85

It seems fair to say that Microsoft’s people saw this retro quality about the iOS and tried to follow suit in a superficial way.

The tablet-friendly tile interface of Windows 8 doesn’t exactly reinvent the wheel. It would not have looked out of place in the late 1980s or early 1990s. The “front door” of several online services used tiles. Consider the Quantum Link screen from 1985 and the AOL Kids Only screen from 1996.

With its gaudy colours, blocky design and full-screen, non-scalable app windows, it has been said that the Metro/Modern UI of Windows 8 actually has more in common with 1985's Windows 1.0 than Windows 7. Curiously, even the Windows 8 logo is reminiscent of the first Windows logo.

But, unlike the iOS, which is simplicity through-and-through, Windows 8's simplicity is superficial. Under the shiny happy coloured tiles, it’s the same old snakes and ladders of the Windows OS.

It’s the PC industry’s turn to make hard choices

The entire Windows-based PC industry may have looked enviously at the success of Apple’s iPad but I think they failed to see the real reasons for that success.

If it’s true that feature fatigue partly or mostly underlies the rush to simpler tablet computing, then it would help explain how the PC industry has ended up in such a sales drought; they have badly misjudged the consumer.

The PC manufacturers continue to live by Moore’s law which says, in effect, that computing power will—and should—increase at an exponential rate, roughly doubling every 18 months. This “gospel of processing power” has become a self-fulfilling prophesy guiding the design, development and marketing of PCs—think “Intel Inside”.

The only computer maker that can compete on the basis of a quality operating system is Apple.

PC computer makers are all reliant on Microsoft for a quality OS. The only way they can compete is on a hardware basis such as processing power.

And as processing power has increased so have the bells and whistles in Windows—how else to show off the processing power? And—rhetorical question—how often does Windows or a core Windows application actually lose features?

Consumers don’t seem to be buying it so much anymore.

Super successful tablets with their low-powered ARM processors are proving that consumers don’t know or care about Moore’s law any more than they care about audio frequencies only dogs can hear. Consumers care about doing what they want to do and ease of use.

Microsoft needs to start caring more about that too.

I think of Windows and I think of how the “off button” used to be stuck behind the “Start” button. That is, until Microsoft got rid of the Start button altogether and moved the off button behind a gear icon that floats invisibly off the right side of the desktop.

Microsoft’s Windows 9 development team needs to ask themselves some hard questions, like:

How did Apple make it all look so easy?

Comments (11) Add New Comment
souosdour
I hate Microsoft
I hate tablets
13
32
Rating: -19
Stanley Q Woodvine
@souosdour

I hate feta cheese.
Even if it was available in tablet form I wouldn't eat it.
10
20
Rating: -10
TheOneLaw
I love feta cheese
Sabayon XFCE on a tablet is an amazingly fast
system, leaving any uSoft stuff in the dirt
18
14
Rating: +4
Steve Malibu
If the moon were made of cheese, would you eat it? I would! What's your favorite planet, mine's the SUN.
Microsoft is great, caught between a rock and a hard place though....
9
17
Rating: -8
Law Student from Canada
I have an iPad and Surface RT (1st Gen of both).

I can say from experience that the Surface RT is decent, but pales next to even an old iPad in terms of its user interface, speed and reliability compared to the iPad. Of that I don't think there is much disagreement.

I wanted to try the Surface because I hoped it would enable me to be more productive - the type-cover and inclusion of Office was a big draw. The hardware is well built,the screen is decent, and the inclusion of a memory card slot and usb port is gold . Using it to take notes and compose papers is great, but even with all the current updates, the unit is still glitchy. Long pauses between typing, frozen screens now and then, wifi connectivity flakiness and other little annoyances that remind you its not as good. Battery life is horrible - maybe 3-5 hours before its dead. And the lack of apps and now the exclusion from the 8.1 Update make it an abandoned dead-end platform for me. I still use it though because its decent for notes and checking the web lightly. It represents another step to a future more versatile work-oriented tablet. But it was also represented a poor return on my investment in it - feels like lost money now that it is abandoned.

The Surface Pro is a better step toward that future but its biggest problem is its cost. It needs to come down to about a third of its current price before it can get sufficient uptake to really scoop up the market. At $299-300, the Surface Pro is much more appealing value proposition. Microsoft should have invested in creating easy to use docking stands for them so they can just slide into a workstation and extend the full Windows experience to a second monitor, keyboard and mouse for the office. This is the real hybrid that casual and commercial users want.

Unless the new Surface Mini comes in at the $199 range or below, I doubt it will see much uptake. There is just too much competition in that space in Android tablets from large brands such as Samsung, Dell and IBM. The fact Win8.1 is supposed to be free for sub-9" tablets means those makers will be able to re-OS existing Atom-based units into full Win 8.1 units at no additional cost and get a jump into the market.

It will be very interesting to see if MS has figured this out and how they play it. Might as well take the $1B loss up front and get market + mind share sooner not later.
15
21
Rating: -6
Stanley Q Woodvine
@TheOne

Sabayon is a "user-friendly" linux distribution based on the notoriously difficult Gentoo Linux.

If Ubuntu Linux is a boat floating on the surface of Linux code, for users who want to use software without getting their feet wet in Linux...then Gentoo is for Linux users who can "swim" in the code.

Sabayon 10 tempted me with its rolling release model and Gnome 2 MATE desktop but I remember my limitations. I'm still dog-paddling around in the shallow end of Linux.

The current Sabayon (14) says it supports the new UEFI firmware underlying Windows 8 computers but I haven't found a report of Sabayon installed on a Surface Pro.
12
16
Rating: -4
trim
Seriously, why do this article completely focus on the first gen surface but completely ignore the surface 2, which is purportedly selling better and is significant quicker than the RT.
11
14
Rating: -3
Stanley Q Woodvine
It goes without saying the Pro is faster than the RT. The RT is only using an ARM processor.

I don't know that the Pro 2 is selling better. Microsoft refuses to release sales figures. Dissecting fish entrails and SEC filing suggests the total sales of all Surface tablets combined appear to still be in single digit millions.

It was Microsoft's most recent filing with the SEC that I refer to, saying they're losing money on the sale of every Surface tablet.
13
14
Rating: -1
RUK
This is a really good article that successfully identifies the appeal of the low powered tablet.

I don't know how Apple makes these things look easy but I suspect that their internal user testing is extensive. Features like the "rubber band" springiness and the subtle calculation of shading makes the virtual element of the GUI seem palpably real, thus easier to use.
11
14
Rating: -3
I own three Surface RTs (1st Gen)
And they are wonderful small business productivity machines on the go. I owned a 1st gen iPad, Apple abandoned that and it is no longer secure, no updates. The post above about no Windows 8.1 for Surface RT is simply wrong - I'm running 8.1 on all three of them just fine. The selection of apps have improved, real Outlook on the go, and the battery life is always 8+ hours. I've recommended them to several friends who are all happy with them. When our clients see ours in action they wish they had one. Seriously, the biggest thing is mindshare and press. Collective think is the most critical thing and the collective think left MS behind on this one - their marketing sucked and they where WAY too late.
21
22
Rating: -1
Bruce
Is the author actually homeless? If so, and he's this with it, that really doesn't make sense.
14
20
Rating: -6
Add new comment
To prevent automated spam submissions leave this field empty.