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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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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.
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.

 
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.
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.
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.
Stratustician
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Stratustician,
User Rank: Ninja
1/20/2014 | 1:45:00 PM
It's all about the marketing
I deal with the iOS vs Windows debate daily, and one of the biggest reasons I hear from customers and partners about why they still push iPads really comes down to messaging and simplicity. Microsoft and the hardware OEMs (in my opinion) still don't really push a strong value proposition to businesses.  We aren't being surrounded with the messaging that most organizations do indeed have a Microsoft infrastructure (Office, Windows, Exchange, SharePoint), and so working with technology that natively can allow workers to work productively across devices is a compelling message.  The problem is that there are so many devices out there, and just too much market noise in general.  iPads sadly sell more since there are few models to choose from, have a consistent experience and (sadly), they have good marketing.  

The other problem that I think is really keeping the platform from really taking off is that it's confusing for folks to configure.  I am still learning how to tweak my Windows 8 tablet.  It's the hybrid between having an application-based tablet and a traditional desktop that while powerful, can intimidate some folks.
Mekon
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Mekon,
User Rank: Apprentice
1/20/2014 | 2:54:02 PM
Microsoft needs to push an alternative vision of portable computing

This article is great, really explains the challenges ahead for MS in the tablet market. 

First, the survey you mentioned where people view their laptop and tablet as separate things, this implies that they WANT to keep them as separate things. 

The fact is, the iPad is a terrible productivity device; next time you go to an airport, check out the people trying to use the iPad with a keyboard to do actual work, it will make your eyes water at how bad this experience is.  For these folks, it would be interesting to introduce them to a Surface 2 with a type cover, miles ahead of anything available on the iPad. 

Second, you are taking BYOD as a done deal in the enterprise. I have talked to several CTOs of large organizations, and they, to the person, _hate_ BYOD as a device strategy. The problem is, up to now they simply did not have much to offer as alternative. When your CEO comes to you with an iPad and says "get this on the network", this is a hard request to refuse if you don't present any workable alternative. This is just beginning to change with some of the newer Windows tablets, too early to tell if a real shift will take place or not. 

I do, however, agree that this productivity tablets will probably ultimately only appeal to a limited set of users, but I do think in the long run, this could be a perfectly decent market for MS and its partners. Maybe ultimately 10% of the tablet market? That would be just fine for MS, selling, as you say in the article, millions of units. 

I also agree MS is misguided in trying to compete directly against the iPad and low-cost Android devices.  It is hard to imagine someone going into Best Buy, looking over an iPad, Android tablet, and Windows tablet, and ultimately choosing the Windows tablet for a consumption device. 

Microsoft will lose if they continue to attack the "front gates" of the iPad and Android markets by trying to convince consumers to buy a Windows tablet for its entertainment/ media consumption chops. This is a losing game.  

MS needs to offer an alternative vision of what these portable device can be, and the only game left in town is to push a vision of a real productivity device you can hold in your hand, connect to keyboard, and also dock with your 24" monitor at your desk. The good news is that the iPad and Android simply cannot do this, they cannot compete here; MS and its partners have this, admittedly niche, market to themselves

Brian.Dean
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Brian.Dean,
User Rank: Ninja
1/20/2014 | 3:14:55 PM
Re: Business sales?
You make an interesting point about determining the price of individual components. It would be nice to have a breakdown of different types of screens at per unit cost, etc.

The prices of processors are readily available, so it is a good place to start. The Venue 8 Pro has an Atom Z3740D that has a tray value of $32. And the Surface pro 2 has an i5-4300U that has a tray value of $281. It does sound extremely strange that a product having a $281 processor alone is selling for $199...

Another point to take into consideration concerning the need for performance in a Windows based tablet is that Microsoft has recently started placing the i5-4300u processor in the Surface pro 2, instead of i5-4200u. 

 
Brian.Dean
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Brian.Dean,
User Rank: Ninja
1/20/2014 | 3:35:11 PM
Re: Microsoft needs to push an alternative vision of portable computing
I agree, as time goes by and PC sales continues to decline the need for a device that is productive (mobile or otherwise) will only increase. Mobile devices have experienced a lot of growth in recent times but to the most part they are only devices that can be used for consumption.

I think it would not require a very big leap for Android or ipad to start offering keyboards and display ports however, the advantage that Microsoft has is that Windows is accepted in the enterprise world. If performance is an issue then maybe DaaS becomes an offering. 
Mekon
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Mekon,
User Rank: Apprentice
1/20/2014 | 4:52:10 PM
Re: Microsoft needs to push an alternative vision of portable computing

The issue with iPad and Android isn't just the keyboards; if you plug a mouse, keyboard, and large screen into your tablet, you expect a desktop experience (something Microsoft has learned the hard way with Windows 8.x). 

OEMs might be able to do some devices like this using Android as the OS, but now the situation that Microsoft finds themselves in the consumption tablet market has exactly flipped; why on earth would anyone buy an Android device with a desktop-like experinece when you can get a Windows tablet that provides the full Windows desktop experience? The only advantage such Android devices would have would be price, but not by much.

You also want access to your desktop software, and only Windows can give you that. Granted, even with Intel's excellent BayTrail processors, the current crop of hybrid tablets isn't quite up to full desktop performance standards. But you can imagine in one more generation of SOCs from Intel, this will probably not be an issue. 

Full disclosure here:  I do NOT think the desktop is dead in any way; the desktop will be with us for information workers for the foreseeable future; obviously, the desktop/laptop computer market is pretty mature, so no big growth can be expected, but PC/Hybrid makers will continue to sell 100s of millions of units.

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