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Microsoft's Device Strategy: The Remaining Flaw

Microsoft's Surface 2 and Surface Pro 2 represent big improvements over the originals, but they still make sense only for certain users.

The answer appears to have evolved over time. Microsoft initially positioned its Surface tablets as a reference design for the rest of the PC industry. The company recognized that Windows 8 was a dramatic change that required new hardware, and its tablets were an attempt to open its OEM partners to the possibilities.

This strategy has worked -- with qualifications. Last year's Windows 8 devices were expensive and unappealing, but many of this year's models, such as the Dell Venue Pro lineup, are cheaper, faster, and more attractively designed. The Surface's influence shouldn't be ignored here, but neither should the impact of Windows 8.1 or the contributions of Intel's new processors.

But the strategy has also backfired. Many of Microsoft's longtime allies now see the company as a competitor. HP CEO Meg Whitman pointedly made that point in October. This hasn't stopped HP and others from developing Windows devices, which should help Microsoft gain tablet marketshare and attract developers. But a March report in The Wall Street Journal suggested Microsoft had to cut licensing costs to keep OEMs invested.

Plus, many of the new devices cater to the same niches that the Surfaces do. There's only room for so many players at a small table, and Microsoft hasn't tried to distinguish its products with low prices. If a Surface is used as a companion device that complements a smaller tablet and a bigger PC, it's actually a pretty terrific tool. But both Surfaces require a keyboard to be useful, so users will have to shell out close to $600 for a base Surface 2 and more than $1,000 for a base Surface Pro 2.

And even if the Surface was initially designed to inspire partners, Microsoft's hardware ambitions have evolved. The Nokia purchase loudly attests to that fact. Many commentators have said Microsoft is copying Apple by making its own software, and to an extent this is true. Apple enjoys enviable profit margins on its iPads, and iOS is so satisfying largely because Apple exerts such firm control over both hardware and software. It's easy to see why Microsoft wants a piece of this action.

But if high profit margins and a powerful ecosystem are the goals, the same question remains: Why deliver two variations on the same finite theme? The Surface 2 and Surface Pro 2 are much more refined embodiments of the theme, but it's a niche theme nonetheless.

Microsoft seems to know this, however. It wouldn't be developing a touch-first version of Office if company leaders truly considered the Surface 2's laptop-like experience adequate. And rumored projects such as the Surface Mini and Surface smartwatch wouldn't be the subject of so many leaks if Microsoft weren't attempting to build more widely appealing computing devices.

These developments suggest Microsoft will eventually offer a Surface device that prioritizes tablet functionality, in addition to today's laptop-infused models. It also suggests some future Surface devices will be more attractively priced. These steps could help Microsoft secure Windows 8.1 adoption not only among consumers, but also in the enterprise, thanks to BYOD and greater user familiarity with the Modern UI.

In the meantime, Microsoft's device strategy faces the same problem it has faced for the last year. Some people see the Surfaces as laptop-like and versatile, but far more see them as too compromised, expensive, and niche-oriented for their needs.

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