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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.

 Microsoft Surface: 10 Best And Worst Changes
Microsoft Surface: 10 Best And Worst Changes
(click image for larger view)

After mostly sitting out the Consumer Electronic Showcase earlier this month, Microsoft touted its Surface tablets last week at the National Retail Federation's Big Show in New York City. But are the devices, which were frequently out of stock during the holiday season, actually making progress? InformationWeek breaks down the good and the bad indicators, both for the Surface line and Windows tablets in general.

The good

Throughout 2013, Microsoft highlighted a number of corporate and institutional Surface deployments. It also established partner programs to build a third-party community around its Surface products. While initial Surface sales were poor, these efforts helped Microsoft to make an important point: Whether for reasons of manageability or utility, the Surface line serves at least some productivity-minded professionals better than an iPad, laptop, or even both.

Microsoft's Surface 2
Microsoft's Surface 2

Microsoft furthered this agenda at NRF, where it welcomed AnywhereCommerce and MagTek, both of which make mobile point-of-sale products, into its Designed for Surface program. In a blog post trumpeting Microsoft's Big Show appearance, the company also profiled a new Surface Pro customer, Scandinavia-based retailer MQ.

The Surface Pro allowed MQ to reimagine its store layouts, Surface senior manager Biran Eskridge told InformationWeek in a phone interview. The tablets are installed in kiosks that connect customers to the retailer's warehouses, meaning that if the desired garment isn't in stock, a shopper can summon it to the store by the next day. As a result, MQ keeps less inventory on hand, which Eskridge said has led to less-cluttered stores, greater attention from passersby, and higher revenue.

[Which tablets ruled last year? Read 10 Best Tablets Of 2013. ] 

The MQ deployment joins a collection of Surface success stories Microsoft has highlighted in recent months, ranging from Delta using 11000 Surface 2s as "electronic flight bags," to real estate management firm Pedcor choosing the Surface for its entire IT division, to physicians using the tablets to provide more personalized care.

Eskridge said Microsoft probably won't share any Surface sales figures before it reports quarterly earnings on Jan. 23. But he pointed to some public data that shines a favorable light on holiday Surface sales.

Ad network Chitika calculated Microsoft's Surface and Surface 2 snared 2.3% of all post-holiday U.S tablet usage in the United States and Canada. That figure was up from 1.8% before Christmas. It also beat the share of well-regarded rivals, such as Google's Nexus tablet.

Retail analytics firm InfoScout found Surface was a popular Black Friday item, particularly the original model, which was on sale for only $199. It was the top-selling item of any sort that day at Best Buy. 

Various online reports have also indicated that certain configurations of the newer Surface 2 and Surface Pro 2 (both which were better received than the first models) were out of stock at many locations throughout the holidays. Eskridge said Microsoft has found that some shoppers who were tempted into stores by the steeply discounted Surface ended up leaving with more expensive models.

Microsoft's customer satisfaction data shows that Surface owners use the device more than they used their previous tablets, Eskridge said, adding, "It validates our point of view."

Outside of the Surface, at least a few new Windows devices, such as Dell's Venue 8 Pro, generated limited buzz during the holiday season. 

The bad

Microsoft has clearly made progress, but put in context we're talking about baby steps, not major strides.

Forrester analyst David Johnson told Informationweek that demand for Windows 8 is "pretty flat" in the enterprise. He noted that employee demand for Windows tablets has risen but said businesses still show a "strong preference" for iPads.

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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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