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1/18/2014
09:06 AM
Michael Endler
Michael Endler
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Can Windows Tablets Break Out In 2014?

One lesson to date: While Apple can still command top dollar, Windows tablets only become widely desirable when they drop to Android-level pricing.

The same seems to be true among consumers. In addition to concluding that the Surface was Best Buy's top Black Friday seller, InfoScout found that Apple's $299 iPad Mini was the top seller at Walmart. Target's top three sellers were also iPad models, and all three sold for substantially more than Best Buy's $199 Surface fire sale.

The InfoScout survey is based on data captured from 125,000 North American users, which makes it a limited sample, but if it suggests anything, it's this: Whereas Apple can still command top dollar, Windows tablets only become widely desirable when they drop to Android-level pricing.

"We've seen that limited price promotions will often cause an uptick in sales for our other products," Eskridge said of the discounts, noting that although a Surface might lure a customer into the store, that customer might leave with the more expensive Surface Pro 2.

Between Windows 8.1 and new form factors, Microsoft and its partners did a lot of retooling to make Windows tablets more attractive. So far, the progress has been modest.
Between Windows 8.1 and new form factors, Microsoft and its partners did a lot of retooling to make Windows tablets more attractive. So far, the progress has been modest.

Does that mean Microsoft and its partners will convert some of the most aggressive discounts into permanent prices? Doing so could potentially boost shipment volume at the expense of margins, and perhaps, as Eskridge implied, increase the number of would-be customers who can be up-sold to costlier models.

"It was important for us to have an intriguing offer around such a busy shopping weekend," said Eskridge, not quite answering the question. "We knew we could generate some interest with the promotion."

Unfortunately for Microsoft, the interest doesn't seem to have extended far. On Dec. 30, InfoScout released new numbers that tracked U.S. retail spending between Thanksgiving and Christmas Eve. The 16-GB iPad Mini was the most-bought item during this span and other iPad models occupied the fifth, eleventh, and twelfth slots on InfoScout's list.

Microsoft scored a victory with the Xbox One, which ranked second. But only two Windows 8.1 devices placed among the top 15: HP's Pavilion TouchSmart 14 laptop, at number four, and Microsoft's 32-GB Surface, at 15. Based on these numbers, the Surface Pro 2 and Surface 2 supply shortages might have had more to do with constrained inventory than overwhelming demand.

Microsoft VP Panos Panay displays new Surface keyboard accessories at the debut of the Surface 2 and Surface Pro 2 in New York.
Microsoft VP Panos Panay displays new Surface keyboard accessories at the debut of the Surface 2 and Surface Pro 2 in New York.

The Chitika data paints a similar story. Yes, Surface tablets gained share while iPads lost some. But the survey still concluded that Apple's devices account for more than three-quarters of all tablet use. In this context, is the Surface's 2.3% share really a victory? It's like a basketball player who makes a flashy shot when his team is already down by thirty points -- notable, but ultimately not very important.

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rradina
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rradina,
User Rank: Ninja
1/20/2014 | 12:03:33 PM
Re: Business sales?
What's the build cost of any given Surface?  Without it, your comments sound too subjective.

The reason I ask is tablet price points are all over the place.  Isn't this in some ways like disk drives?  It doesn't matter what capacity, there's a certain minimum price and that's pretty much what it costs to build one regardless of whether it offers 256GB or 3TB.  If we apply that logic to tablets, the SOC certainly can differentiate it but what's the real cost difference between a single core ARM and the latest quad?  When a touch screen is engineered, what's the real cost differnce between a 800x600 cheap display and something like a Retina display?

Apple never sells stuff at bad margins.  If the iPad mini is sold for $299 with what should be good margins for all, why would $350 be the break-even for a Surface RT?  Is it really a blood bath at $199?

Of I'm just providing opinion too but I'm trying to correlate what the real costs might be based on an assumption that everyone isn't selling tablets at a loss.  Personally, I bought a Dell Venue 8 Pro for $229 at Microcenter.  Microcenter is still selling them at that price which is pretty much the best price out there (even better than Amazon).  Did Microcenter buy truckloads of them and they are trying to dump them?  Is Dell bleeding money at that price since they'd have to give them to Microcenter for no more than $199 for even a Microcenter break-even?  What's the real cost difference between a Venue 8 Pro and a Surface?  Does the Haswell really add hundreds to the cost?

Lot's of speculation but we need facts to determine whether or not we really have a bloodbath at $199 and break even at $350.
melgross
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melgross,
User Rank: Ninja
1/19/2014 | 7:25:31 PM
Business sales?
I'm not too impressed with the examples given for surface Pro sales. Delta is an all Microsoft shop, that's well known. And the reason given for their moving to Surface Pro was that they didn't need to do much. But, I have a friend who is an executive in IBM's enterprise software sales division. Recently, they gave him a tablet. Which one? Surface Pro? No, it was an iPad air. As far as I can tell, enterprise wins for Surface anything, has been dismal. Consumer uptake if anything, has been worse. In talking about selling a $500 tablet for $199, one has to remember that that's well below their cost. And out of that $199, Best buy needs to take its own profit. So Microsoft likely sold them to Best Buy for around $150, no more. That's a bloodbath! Even $350 is not more than break even, if that, when sold direct by Microsoft. But if sold by a retailer, Microsoft is again losing a lot of cash per sale. Surface Pro tablets, as we know cost much more. Unless Microsoft gives sell through numbers, we should assume that sales are another disaster.
jagibbons
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jagibbons,
User Rank: Ninja
1/19/2014 | 4:38:21 PM
Re: The key to Microsoft coming on top this year is actually Intel
When your market share is as low as Windows 8, it's easy to say they have room for growth. You can only go up from the bottom. The new convertibles and tablets coming with Windows have potential, but so far I've seen and dabbled with a number of options. The statement that for some tasks, convergence is more compromise than convenience still holds true. Time will tell if that changes.
Kevin Levrone
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Kevin Levrone,
User Rank: Apprentice
1/19/2014 | 1:41:07 PM
The key to Microsoft coming on top this year is actually Intel
With the arrival of the new Intel Bay Trail tablets and convertibles (see Dell Venue 8/11 Pro, Asus T100, Lenovo Miix 2, etc) which are faster and more productive than the Apple's tablets or various Android tablets, the trend in the following months will heavily favor Microsoft.

"Full Windows" is the key here. Full Windows means "real computer" in people's minds. Whereas people look at tablets as crippled computers with very limited productivity capabilities, they are now beginning to realize that they can have full computers in a tablet-sized format, with no compromises whatsoever: same weight, same portability, same (or better) battery life, same (or better) speed. And at a lower price too, with included Office.

With its separation between OS X and iOS hardware, Apple asks each software publisher to essentially spend twice the resources in building productivity software for Apple platforms alone (not mentioning Android or Windows). This is quite an effort, and that's why you don't really see good productivity software for iPad. 

Microsoft's Windows 8 desktop/touch unification strategy will really pay off in the coming months.

 
Brian.Dean
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Brian.Dean,
User Rank: Ninja
1/19/2014 | 1:00:06 PM
Software and Hardware
I think a lot depends upon the software and app store of a mobile device to make it appealing to a customer. Hardware of a mobile device is slower than a PC because a trade-off between long battery life and performance exist. As these mobile processors keep getting faster, consumers might opt for a Windows based tablet with greater demand, in other words, if growth does happen it is going to be quite slow.
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