Microsoft (NASDAQ: MSFT) Surface Tablets running Windows RT continue to take heat from portions of the media -- including fresh claims that overwhelmingly positive Surface customer reviews posted

The VAR Guy

December 18, 2012

3 Min Read
Microsoft Surface Tablets: It's Just a Flesh Wound

Surface and Windows 8 Best Buy

Microsoft (NASDAQ: MSFT) Surface Tablets running Windows RT continue to take heat from portions of the media — including fresh claims that overwhelmingly positive Surface customer reviews posted on BestBuy.com and Staples.com may have come from Microsoft’s own marketing folks. Instead of weighing in on that conspiracy theory, The VAR Guy would like to offer this prediction: Surface Tablets will start selling pretty well in 2013, as will Windows 8 tablets from PC makers. Here’s why.

Let’s address Microsoft’s core mistakes and challenges right up front.

  • The first Surface tablet, running Windows RT, lacks the full capabilities of Windows 8 and is expensive ($499 to $699) compared to other starter tablets.

  • Microsoft alienated some PC makers by building its own tablets.

  • The next Surface tablet, arriving in January 2013 and running full-blown Windows 8, starts at $899 and seems to have a lofty price tag, according to some critics.

  • Microsoft initially limited Surface distribution to its own retail stores before slightly opening up to retail partners like Best Buy and Staples. And during a recent trip to Best Buy, Microsoft’s Surface and Windows 8 display area looked awfully lonely (see photo, top of blog).

Deep Pockets and Corporate Patience

Now here’s the thing: Do you think Microsoft is ignoring its critics? Is CEO Steve Ballmer sitting in an ivory tower somewhere, declaring Surface a success, and telling the critics they’re just plain wrong?

Absolutely not. Surely, Microsoft plans to make course corrections with Surface and the overall Windows 8 strategy. And remember: Microsoft is still hugely profitable. The company is not bleeding cash. On the contrary, Microsoft has $66 billion in cash, according to Yahoo Finance.

Of course, Microsoft can’t “buy” its way out of the Windows 8 and Surface challenges. That’s where the course corrections enter the picture. At some point Ballmer and Microsoft will need to:

  • Adjust pricing: Drop Windows 8 and Windows RT Surface prices to align more aggressively vs. iPad and Google Android tablets.

  • Talk XBox and Office 365: Microsoft must connect the dots more clearly between Surface tablets, XBox Live (for consumers) and Office 365 (for businesses).

  • Empower Channel Partners: Ballmer should personally apologize to the channel for failing to make Surface a partner play. Then, Microsoft should train channel partners and vertical market application developers to promote surface into hospitals, insurance companies and other markets where tablets can be highly effective productivity tools.

  • Target Android, Not iPad: Long term, the real opportunity for Microsoft on tablets and smartphones is to counter Google Android. Unless Apple stumbles badly with bad products or delayed upgrades, Microsoft can’t win back the iPad and iPhone crowd. But the Android crowd is a pretty fickle bunch that sometimes gets tired of software bugs and lame hardware designs.

If The VAR Guy had to guess, Microsoft will begin to roll out these Windows 8 and Surface tablet adjustments in March 2013 — just in time for the company’s fiscal Q4 (April-June 2013). Worst case, the adjustments will come in July 2013 — in time for the start of Microsoft’s next fiscal year.

In the meantime, Microsoft is both executing on its current Windows 8 strategy, gathering feedback, and considering course corrections down the road.

A year or two from now, Microsoft’s decision to initially limit Windows RT Surface sales to its own retail stores will look brilliant. Only through such tight control can Microsoft gather the feedback it needs to move forward…

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