Microsoft's New Surface Tablets: No Easy Sell

Microsoft's Surface 2 and Surface Pro 2 improve on the original tablets in almost every regard -- but analysts say big sales hurdles remain.
Microsoft refreshed its tablet lineup Monday. Now that tech analysts have had a look at the new hardware, many of them agree: The Surface 2 and Surface Pro 2 should provide a better user experience than their much-criticized and poor-selling predecessors. Whether these improvements will translate to stronger sales, however, is less certain.

The new devices include faster processors, a new color option for the Surface 2, more storage and RAM configurations for the Surface Pro 2, nicer screens, redesigned kickstands that support two viewing angles, and new accessories. They also come with free access to a number of Microsoft services, including 200 GB of SkyDrive cloud storage for two years and free access to millions of Skype hotspots. The Surface Pro 2 also boasts seven to eight hours of battery life, a 75% improvement over the original device.

In an interview, Gartner analyst Carolina Milanesi said some stockholders and observers dismissed the new devices before they were even revealed, saying that Microsoft should give up the project altogether. "I don't think that's really the right approach," she said. "Microsoft can't give up."

She pointed out that the new devices not only address many of the earlier models' compromises, but also do a better job juggling Microsoft's potentially confusing ecosystem -- a setup that includes both Windows 8, which supports both Modern UI touch apps and desktop software, and Windows RT, which includes Microsoft Office but is otherwise incompatible with legacy Windows programs. "[Microsoft has] done a much better job this year positioning the Surface Pro 2 as a professional choice and the Surface 2 for everyday users," Milanesi added.

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Milanesi also discussed the new two-step kickstand. "It will help me," she said. "I felt I needed to push [the first-gen Surface tablets] away because the angle was too sharp." She added that the new kickstand will make the tablets easier to balance on one's lap, and that all the new keyboards -- even the ultra-thin Touch Cover 2, are more rigid than the original accessories.

Forrester analyst JP Gownder noted in a blog post that the Surface 2 "has been smartly designed to look different from its functionally different cousin the Surface 2, sporting new colors." Gownder also praised the Intel Haswell processor inside the Surface Pro 2, calling it "powerful." He noted that the product also includes a variety of incremental improvements, including Windows 8.1, which will be released less than a week before the new Surface tablets hit the market on October 22, and new accessories.

Among these accessories, Gownder singled out the Surface Docking Station, which he said "effectively [makes the Surface Pro 2] a desktop replacement." He also mentioned the Power Cover, a new keyboard cover that further extends battery life. "[It] offers value for enterprises, information workers and even ultra-mobile consumers," he said.

In an emailed statement, Forrester analyst Sarah Rotman Epps said, "Surface 2 is better positioned to compete with iPad" -- while the Surface Pro 2 is aimed more at the MacBook Air's target audience. She also pointed out Microsoft's growing portfolio of integrated services.

"Surface is a linchpin for Microsoft's new 'devices and services' strategy," she wrote. "It's not just a stage for Windows, but also Office, Skype, Bing and SkyDrive. Microsoft's future depends on consumers and businesses using these services, and Microsoft feels like it can't rely solely on hardware partners to deliver these experiences anymore."

Still, Rotman Epps also said the Surface lineup's improvements won't make it an overnight best-seller.

Gownder pointed out similar struggles, noting that Microsoft must avoid the advertising mistakes it made with the first Surface tablets, whose commercials emphasized young people dancing more than productivity and functionality. He said the company will also face challenges balancing its device-maker ambitions and its relationship with OEMs. "Microsoft is pitting its own Surface and Surface Pro devices against the entire panoply of Windows 8.1 and RT devices produced by its competitors," he wrote. "Balancing the need to not offend OEM partners while giving Surface the push it needs to succeed with consumers places Microsoft between Scylla and Charybdis."

Milanesi, meanwhile, said Microsoft will face challenges with consumers not only because "consumers don't see Microsoft as sexy," but also because the new device's premium price points could deter buyers. The Surface 2 starts at $449 and the Surface Pro 2 starts at $899. She noted that the Surface 2 will compete with the iPad from a price-point perspective, but it doesn't have iOS's strong ecosystem. Meanwhile, for consumers who don't want to invest in a premium device, she said, "Android is still the easy choice."

Milanesi implied that businesses will be less likely than consumers to balk at the Surface Pro 2's cost, however. Because the Surface Pro 2 allows IT managers to issue a single device instead of a separate laptop and tablet, interested enterprises might actually consider the price quite reasonable, she said.

Jack Gold of research firm J. Gold Associates offered one of the most condemning critiques. In an emailed statement, he noted that the Surface tablets aren't competitive with other devices running the same processors. "[Microsoft seems to be] maintaining the traditional PC mantra -- keep upgrading the chip and [hardware] a little bit every year at a slight lower price." The company needs something more innovative, he said.

"I don't think this will dramatically alter their sales trajectory," Gold concluded.

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