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.
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!
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?