Neowin: Despite the write-down, Microsoft's Surface strategy makes sense

By on October 11, 2013, 1:00 PM

When Microsoft announced it would write-down $900 million in Surface RT inventory, many thought it could signal Microsoft’s exit from the market and that the company would return to its old model of leaving its hardware partners to build Windows devices. Yet Microsoft defied those who called for the exit and forged ahead with the Surface 2 product line.

On paper, it seems like a foolish move and that Microsoft is throwing its money away on creating a product that consumers do not want. But if you look at the market as a whole in tandem with Microsoft’s new strategy, you can begin to see why the company is willing to lose money in this segment up front in a bid to secure long-term success.

Right now, in the mobile market, Microsoft does not have a strong footprint, and the time has come to make heavy-duty investments to ensure that Windows is part of the tablet conversation. If they don't move now - if they do nothing - despite the losses, they will end up in worse shape than in the smartphone segment, in which Microsoft has only managed to gain roughly 3% of the worldwide market.

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This article is brought to you in partnership with Neowin.

User Comments: 5

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wastedkill said:

What the strategy to make more products than you know you can sell strategy? their strategy doesn't make sense they could easily get a foothold in the market but they dont want to instead they want to act all big and do stuff the big boys do instead of starting off small then going big.

Makes 100million tablets only sells 10million, calls that a good strategy good job!

psycros psycros said:

Yes, selling an overpriced, mass-market product that almost nobody likes is pure genius. Its worked so well for other companies.

Vrmithrax Vrmithrax, TechSpot Paladin, said:

I can fully understand what Microsoft is going for here, and while I absolutely hated Windows8 on my multi-monitor workstations (both at work and home), I found the user experience to be amazing on the Surface products. Actually using a Surface RT (and previously a Windows Phone) made me appreciate what they were going for. So, as I said, I understand the underlying motive and ultimate goals...

But, I just can't seem to get behind the strategy. It's like there is something missing in the equation. RT feels too much like a forced stop-gap measure to try to unify user interfaces across the full phone to computer spectrum, and then that stop-gap took on a mind of its own. It feels like somewhere in the near future, there will be another sweeping change, and RT will end up being an orphaned dead end.

I really think that MS would have been much better off putting some extra time into Windows 8 and making it truly cross-platform (ARM and x86), rather than fragmenting it into RT and Pro. That would have made the Surface products a much more interesting product to dive into, and much less confusing to the average consumer. The direction Ubuntu is moving, with the goal of being fully cross-platform and having all Ubuntu software work wherever you need it (phone through PC) is where it's at. And, I think (or hope?) that is where Microsoft is shooting long-term. This in-between part is when things suck and get messy.

JC713 JC713 said:

I dont know about this. The surface would have been successful if tablet OS and the Surface were released to compete with the early iPads (1,2, and 3).

Guest said:

I find it telling that Microsoft can only claim a 3% market share of mobile, after how many years of Windows CE/mobile/5/2003/6/7, and now 8. There was a time when Microsoft had better numbers, I believe around the WinMo5/2003/6 mark. Back in 2008 the phone everyone was hanging out for was the HTC Diamond/Touch/Touch Pro that ran Windows Mobile 6.

So what happened? Microsoft's insane policy of abandoning customers happened. Now, there is never going to be great compatibility between generations, the Android fragmentation and aggressive IOS update schedule is testament to that. However Apple at least pays lip-service to it and Google tries to make updates feasible in spite of carrier shenanigans. We're not talking about support for 5 year old phones here, we're talking support for <6month old premium phones like what Nokia were releasing for WinMo7 that then got promptly abandoned by Microsoft upon Windows8.

Microsoft had a grand tradition of backwards compatibility at all costs throughout the history of Win16 and Win32 on x86 and did well because they didn't insist their customers throw away all hardware and software investments every generation. In every other software market they have had the exact opposite policy, with predictable results.

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