Microsoft Plans More Tablets As Analysts Lose Faith In The Surface
by Anthony Shields, Minyanville staff writer
In the month since Microsoft’s (NASDAQ: MSFT) launch of the Surface RT, analysts have been eagerly awaiting the tablet's sales figures, despite Microsoft’s tight-lipped stance on its performance. Although few are willing to jump to conclusions, some analysts are taking Microsoft’s silence as an omen that Surface RT could be a flop and -- along with the disappointing adoption rates of Windows 8 -- is a part of the one-two punch that could cripple the company.
Perhaps most unnerving is the fact that Microsoft was not even predicting big numbers during the Surface’s launch in the first place. According to an article by ZDNET, the company was only expecting to sell 3 million to 5 million units this quarter, which is a paltry number when you consider that Apple (NASDAQ: AAPL) sold 3 million tablets in one weekend following the release of the iPad 4 and iPad Mini. Taking this into consideration, if Microsoft has fallen short of its initial sales predictions, it would be a major embarrassment for the company, and an indicator of its inability to catch up with its competitors.
Those that cast doubt on Microsoft are blaming weak consumer demand that is exacerbated by the tablet and keyboard’s $599 price tag, which prevents it from competing with the iPad 4 at $499 or the iPad Mini at $329. However, another potential blow to the system comes from its now infamous lack of apps, which is hurting the Surface’s perceived value.
The problem doesn’t appear as if it will get any better in the future because, while Microsoft has increasingly offered more lucrative splits than Google (NASDAQ: GOOG) and Apple, developers are declining to build programs for its tablet. Most surprising is that even Facebook (NASDAQ: FB) has yet to support Surface, which must seem like a stab in the back to Microsoft since the company invested a $240 million stake in the social network in 2007 and integrated its Bing search engine with Facebook.
Still, despite all these worries, Microsoft seems to have some confidence in its tablets. The company recently announced the price tags for its upcoming Surface Pro tablets, which will launch next year. More expensive that any previous tablets, the 64 GB version of Surface Pro will cost $899, while the 128 GB tablet is set at $999. Unlike the RT, the Pro seems designed to be a major step toward replacing laptops with tablets, meaning that it isn’t designed to compete strictly with Apple’s iPad or Google’s Nexus. Still, considering that both tablets will cost upwards of $1,000, once the $120 price for the keyboard add-on is factored in, the Pro just barely competes with similarly performing laptops on price.
If that wasn’t enough, it was recently leaked that Microsoft is already working on three more tablets to expand its fleet. Two of these tablets are merely next generation iterations of the RT and Pro, with upgraded chips from ARM (NASDAQ: ARMH) and AMD (NYSE: AMD) respectively. However, the third device will be dubbed the Surface Book and will feature a 14.6 inch screen and an Intel (NASDAQ: INTC) Haswell chip. From the looks of things, this new Surface Book may take the Pro’s place as the high end model, as ARM's tablets and AMD’s tablets seem to be offering reduced processing power and smaller screens than their current versions. This means that future RT and Pro models may be priced more competitively to their counterparts.
In the end, Microsoft’s silence regarding sales may be weakening analyst confidence in the Surface, but the company seems dead-set on carving out a place for itself in the tablet industry. Perhaps the Microsoft's continued investments are signs that things aren’t going so bad, though only the numbers will tell if its Surface projects will generate profits or pity.
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