With Surface Pro, Microsoft Is Trying To Recreate The PC Market

The Platform is a regular column by mobile editor Dan Rowinski. Ubiquitous computing, ambient intelligence and pervasive networks are changing the way humans interact with everything.

In professional sports, a “tweener” is a player who’s not quite large, strong or fast enough to be a star. A tweener can be a good player, but his—because the term usually refers to men—in-between stature makes it difficult to find the right position and generally makes for an awkward fit on the team.

The Microsoft Surface Pro 3 is a tweener. Like its predecessors, the Surface Pro 3 is designed to be both tablet and laptop, a mobile device and a PC. The Surface Pro 3 has the hardware and most of the capabilities that you’d expect in a PC, but in the form of an elegant 12 inch tablet. If you were to take the Surface Pro 3 at face value, you’d see a pretty darn good computer—assuming, that is, you like Windows 8.

“This is the tablet that can replace your laptop,” said Panos Panay, Microsoft’s VP of Surface. Or, to paraphrase what one Microsoft employee said to me yesterday, “It is a superior laptop designed to be elegantly mobile.”

But you can’t really evaluate the Surface Pro 3 as the sum of its features. Because it’s a tweener.

Quick Thought: First Impressions Of The 2-In-1

I wanted to put Microsoft’s claim that the Surface Pro 3 could replace my laptop to the test. So, after receiving a review unit from Microsoft, I took the bus back home to Boston from Manhattan and attempted to write this article.

After downloading a free trial of Office 365, I was able to start writing with Microsoft Word while also Skyping with the ReadWrite team via a split screen. The touchscreen app switcher in Windows 8 let me look up information along the way. I downloaded Skitch to format photos and screenshots. But Internet Explorer let me down when it came to loading the piece into our homebrew publishing system, especially where uploading and formatting photos was concerned. Ultimately, I finished it on a MacBook Air with Google Chrome. 

After writing the article in Word, I spent the rest of the trip home reading The Leftovers by Tom Perrotta on the Amazon Kindle app for Windows 8. I oscillated between using the kickstand for “lapability” and holding the Surface Pro 3 in my hand. While it may be the lightest Surface Pro ever, it’s still heavy if you hold it for long.

Bottom line: the Surface Pro 3 can almost replace my laptop and tablet, but it doesn’t quite finish the job.

The 2-in-1 tweener hasn’t fared particularly well in the market over the last several years, largely because of price. People want tablets that look and feel like tablets and generally start at mobile-like prices—say $499 (at the high end) and down. The lowest grade Surface Pro 3 starts at $799 for 4GB of RAM, 64GB of storage and an Intel Core i3. From there, pricing shoots straight out of normal tablet range, all the way up to high-end laptop levels—i.e., $1,949 for 8GB of RAM, 512GB of storage and an Intel Core i7.

Research firm NPD Group reports that sales of tablets larger than 9 inches are down 12% this year, according to Bloomberg. This is not only a bad omen for the 12-inch Surface Pro 3, but also for Apple’s 9.7-inch iPad. Smaller tablets tend to be cheaper, which pushes market volume for manufacturers, a fact that Google and Amazon are well aware of with their small primary tablets.

Microsoft held 1.3% of the tablet market share in the first quarter of 2014 and didn’t even break the top five manufacturers, according to research firm IDC. Overall, tablet shipments are down 3.9% year-over-year; PCs are down 4.4%. These trends don’t seem favorable to Microsoft’s Surface Pro strategy.

Recreating The PC Market

Microsoft wants everyone to think the Surface Pro 3 is a tablet, but its pricing gives the game away. Microsoft wants to recreate the lucrative PC market that made the company billions of dollars by repackaging a PC into tablet clothing and then hammering away at the Surface product line until everybody believes that PCs never really went anywhere, they just got a touchscreen and a cellular connection.

This line of thinking has, to be blunt, so far fallen short. Microsoft’s bottom line (likely more than $1 billion in losses on Surface inventory in the last two years) is proof. People want bigger smartphones and smaller tablets. When they want PCs, they want either affordable laptops or high-powered expensive desktops with large monitors. The market has not yet said, “we want tablets that act like PCs and are priced much higher than the tablets that we would otherwise buy.”

See also: Surface Pro 3: Meet Microsoft’s New Tablet Hybrid

If Microsoft is looking towards the business user and enterprise market for Surface sales, it’s going to have a hard time on that road as well. Many enterprises are reluctant to upgrade systems—just look at how long they kept Windows XP running—and they’re not enamored with Windows 8.1. Even the entire Chinese government has declined to use Windows 8.

Some analysts remain optimistic about enterprise sales. Take Jack Gold from J.Gold & Associates:

Although the price is still a bit high for many, this unit is meant to be a high end device with full capability for corporate users where a premium price of a few hundred dollars is far outweighed by the productivity enhancing ability of this device.

Microsoft doesn’t want to cede the entire consumer market to Apple and Android. But Redmond’s math just doesn’t add up.

Give Microsoft credit for being mulish. Old Microsoft or new, the company retains the ability to just put its head down and insist that its products are cool, that they’re exactly the right fit for everybody and that you’re missing out if you don’t buy one soon. This is exactly what Microsoft did with the Xbox and what it has been trying to do with Windows Phone for several years now. Bing probably falls into that category too.

Quote of the Day: “Bothered by what the agents were saying, I informed them that I would first need to read the order they had just delivered—and then consult with an attorney. The feds seemed surprised by my hesitation.” ~ Lavabit founder Ladar Levinson writing in The Guardian on being served court orders for the secure email service’s encryption keys by U.S. authorities.

Sometimes that works. Xbox, after several years and hundreds of millions in marketing dollars, finally found a semblance of success. The Xbox One was a much-anticipated product that delivered a superior gaming console (if one that featured several misguided assumptions by Microsoft). Microsoft has shown a willingness to burn lots of money while iterating products towards commercial viability.

The Surface Pro 3 is an interesting device that has some notable merits. But Microsoft may be in for disappointment if it thinks it can sell the Surface Pro at PC prices and still achieve critical volume.

If Microsoft could build a Surface with the same hardware specs and performance as the Pro 3, but market and sell it in the notebook price range (from $300 to $1,000), it could shed the tweener label. As it stands, though, shoehorning a PC into a mobile design and selling it like a laptop seems unlikely to draw the crowds the company is clearly hoping for.

More On Microsoft, Windows 8 And Surface Pro 3

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