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Why Is Microsoft Setting More Money On Fire With Surface 2? 616

Posted by timothy
from the producers-was-a-prequel dept.
Nerval's Lobster writes "Never mind that sales of the original Surface totaled a pitiful $853 million in its first few months of release, or that the tablet failed to make Microsoft an up-and-coming player (or any kind of player, really) in the mobile-device wars: Microsoft's now rolling out Surface 2 and Surface Pro 2, which feature upgraded specs and accessories but no radical adjustments to the first generation. Why would Microsoft pour good money after bad? The answer could be outgoing Microsoft CEO Steve Ballmer, who late last year released a memo suggesting that Microsoft was evolving into a 'devices and services' company. 'There will be times when we build specific devices for specific purposes, as we have chosen to do with Xbox and the recently announced Microsoft Surface,' he wrote. 'In all our work with partners and on our own devices, we will focus relentlessly on delivering delightful, seamless experiences across hardware, software and services.' That meant Surface (then on the cusp of release) was clearly a harbinger of the company's future direction — and canceling the project after the first generation would have been a stinging refutation of Ballmer's strategy. By spending the money and resources on a second device generation, Microsoft manages to save a little bit of face, albeit at considerable cost. But imagine the hilarity that'll ensue if this second generation goes down in a huge ball of flames like the first."
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Why Is Microsoft Setting More Money On Fire With Surface 2?

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  • Alternatives (Score:5, Insightful)

    by Anonymous Coward on Tuesday September 24, 2013 @10:31AM (#44936119)

    What other choice does Microsoft have? It can't get back in the game if it gives up trying.

  • Re:XBOX? (Score:5, Insightful)

    by i kan reed (749298) on Tuesday September 24, 2013 @10:31AM (#44936143) Homepage Journal

    A solid market that they haven't yet made a NET profit on, and may have lost in the next generation(I really hope they have).

  • by gstoddart (321705) on Tuesday September 24, 2013 @10:38AM (#44936271) Homepage

    The articles I'm seeing so far seem to boil down to "yeah, it's an improvement, but I still don't want one".

    Microsoft is so focused on Office and Outlook that they seem to forget that the huge consumer market for tablets isn't being driven by these features. When everything you do is geared to a corporate environment, people not using it in a corporate environment don't look at your product.

    It just often seems like Microsoft is doing it's usual "this is what the market wants", and not actually looking at what people do want.

    And, quite frankly, Excel spreadsheets, PowerPoint slides, and connecting to a corporate Exchange server with Outlook .. that's not what the vast majority of people buying tablets use them for. It's like they're stuck in that "I'm a PC" mindset from those Apple commercials where the Mac is talking about having fun, and the PC is talking about making charts and saying those are fun.

    Tablets are (from what I can see) used as infotainment devices with the ability to send some emails and surf the web. But somehow Microsoft, as ever, is looking at the business use case -- and I am pretty sure that the business use case is a much smaller chunk of the market.

    So in terms of what is going to make people choose the Microsoft tablet over an Android tablet, it seems like a much smaller group is going to be looking for that.

    Whether this is a product Microsoft keeps losing money on until they get any meaningful market share (like they did with the XBox), or the product starts gaining traction ... I have no idea. But looking at what I use my tablet for, Microsoft seems to be missing the point.

  • Re:XBOX? (Score:4, Insightful)

    by Sockatume (732728) on Tuesday September 24, 2013 @10:43AM (#44936361)

    MS lost most of that money as a write-off replacing faulty units of what was by that point a very, very successful piece of hardware. Meanwhile the Surface moulders in stock rooms, without as much as a cut in its price for the new model to get it into people's hands.

  • by carnaby_fudge (2789633) on Tuesday September 24, 2013 @10:43AM (#44936363)
    So it does all those things you claim users don't want. How does that prevent Surface from doing all the things users do want?

    Let's see... streaming video from Hulu, Netflix, Amazon? Yep. Lots of games? Yep. Take photos and mess around with them? Yep. Take notes? Yep. A UI that is fun to use? Yep. Skydrive / cloud storage? Yep. Nice looking device? Yep.

    What exactly are these missing features that everyone wants that they can get from Android and iPad tablets??
  • by UnknowingFool (672806) on Tuesday September 24, 2013 @10:50AM (#44936493)

    and canceling the project after the first generation would have been a stinging refutation of Ballmer's strategy

    Then what was the Kin? It was barely on the market for 60 days when it was killed. The only difference I can see was the Kin was horribly buggy and maybe it was a side project. Ballmer seems to think that the future is devices which MS has not been doing well considering a decade of Windows Tablets and the death of Windows Mobile.

  • by Sponge Bath (413667) on Tuesday September 24, 2013 @10:53AM (#44936559)

    I know how great it is to bash Microsoft in absolutely every thread their name appears..

    The unfortunate state of /. is 90% of stories are click baiting fanboy fodder. It makes it a joyous occasion when an occasional technical article slips through.

    However, the Surface Pro 2 looks very attractive. I am buying one.

    I'm not buying one... yet. What most partisans fail to see is Microsoft has no choice. Tablets are the future for the majority of consumers. Microsoft can't compete using someone else's OS. Microsoft can't rely on hardware "partners" to follow through. Their only long term chance is to keep plugging away at the Surface Pro until hardware power, battery life and application availability hits a tipping point. They may still fail, but quitting now is certain failure.

  • Re:it's fun (Score:5, Insightful)

    by ganjadude (952775) on Tuesday September 24, 2013 @10:57AM (#44936625) Homepage
    the issue to me is an RT tablet is pretty much useless and the pro is just to expensive. especially after you include a 130-200$ cover to it. Make me a sub 500$ pro and id be all over it
  • by gstoddart (321705) on Tuesday September 24, 2013 @10:58AM (#44936661) Homepage

    So it does all those things you claim users don't want. How does that prevent Surface from doing all the things users do want?

    I'm not saying it can't, but Microsoft is marketing is largely on the fact that it's got Office and Outlook. Which makes it look like that's the main point.

    But, if you already use Google's services, an Android tablet is more useful to you because it's already integrated with those. If you already use Apple's stuff, you're going to stick with that. And Microsoft is to late to market with this people are already on one of the other platforms.

    The reality is, unless you specifically want this stuff to be delivered to you by Microsoft, and if you can get past some of the awful things I've seen about the Metro interface, you might not look at them.

    Microsoft has burned a lot of goodwill with people over the years. So unless I had a compelling reason why I'd want/need to be using Microsoft stuff, I'm more inclined to buy an Android device. Because it's got more apps, and because I'm already using Android.

    So, unless you are really really keen on having a Microsoft product, there is very little to make a compelling argument that's what you should go out and buy.

  • by goombah99 (560566) on Tuesday September 24, 2013 @11:06AM (#44936815)

    One could easily have said the same thing about Microsoft Word. It was a copycat and it sucked compared to Word Perfect when it first came out. But slowly they kept making it better and it won the market. One could have said the same thing about the early DOS, then the early Windows 2.0. Even windows 95. All those eventually won the markets that others owned. Moreover the same conditions exist now. It's not a saturated market; it's a growing market size.

    Microsoft has followed this same pattern with all their incremental advances as well. All their new product revision completely stink at first. then they settle in and make them workable. Indeed things like Xune and PlaysForSure are outliers in that Microsoft didn't just bear down for the long haul.

    Microsoft knows that embrace and extend works over time because it always has. Given they have a positive cash flow it makes even more sense since there's no ticking clock.

  • by MickyTheIdiot (1032226) on Tuesday September 24, 2013 @11:09AM (#44936871) Homepage Journal

    Except the data from Democratic presidencies doesn't support that stereotype. But obviously you're already facts impaired so why continue to argue?

  • by geek (5680) on Tuesday September 24, 2013 @11:14AM (#44936965) Homepage

    Microsoft is so focused on Office and Outlook that they seem to forget that the huge consumer market for tablets isn't being driven by these features.

    They are focused on these because it's all they have left. The OS is largely irrelevant now thanks to cloud services. Enterprise solutions are being edged out by BYOD options. Microsofts enterprise software is in a state of flux (SCCM 2012 is a nightmare IMHO). The cost to use MS software (I say use and not own because they are increasingly moving towards a rental model) is prohibitive and free or cheaper options exist.

    Nevermind that MS just has a horrible reputation. No one wants to do business with them. It's like being bullied for 15 years through school by the same asshole and then that asshole wants to be friends after college and hang out.

  • by _xeno_ (155264) on Tuesday September 24, 2013 @11:16AM (#44937001) Homepage Journal

    Really? Excel is one of your top three selling points to consumers?

    One of the (very few) selling points for the new iPhone 5C and 5S is that they now come with Apple's spreadsheet program for free, so - yes, apparently this is a thing people want? And that's not even on tablets, that's on a new phone.

    In any case, yes, office apps are a thing people use on tablets. Tablets are getting used in the office these days as they're more portable for certain applications. They're getting used enough that Apple decided to make their office apps free on new devices.

    If even Apple thinks people want spreadsheets on their tablets, I think it's safe to say that it's a thing people want, even if it isn't anything I'd ever want.

  • by DeathToBill (601486) on Tuesday September 24, 2013 @11:20AM (#44937105) Journal

    Exactly. The Surface 2 starts at £359, the Surface 2 Pro at an eye-watering £719. If you want the one with 512GB of storage you are looking at one thousand four hundred and thirty-nine pounds, know to the rest of the world as a f!cking big wadge of cash. When did you last spend that kind of cash on a PC? I didn't spend that much on my last car.

    Microsoft doesn't just mistakenly think consumers are interested in those features, they also mistakenly think people will pay between three and twelve times as much to get them.

  • Re:XBOX? (Score:4, Insightful)

    by JDG1980 (2438906) on Tuesday September 24, 2013 @11:21AM (#44937135)

    The XBOX 1 lost 4 billion dollars. It's now a solid market that Microsoft dominates.

    First of all, Microsoft doesn't "dominate" – they are one of several big players. (And the Xbox One definitely looks like it's going to play second fiddle to the PS4.) Secondly, market share is only important to a publicly traded corporation insofar as it translates into current or future profit. Microsoft burned so much money ramping up the Xbox line that they still have barely broken even, and when you consider the time value of money, they're probably still in the hole. They would have been better off paying that money out as dividends.

  • by dcarmi (940742) on Tuesday September 24, 2013 @11:23AM (#44937161)

    Trouble is that people have learnt that it is possible to not use Windows. They know about iPads and Nexus or Galaxy tabs. Until recently there was no real Microsoft option in this area.

    Up pops Microsoft with their Windows tablet and hurrah! Except, it isn't quite the Windows we all know and relatively expensive and it flops. So MS try again, failing miserably to make it a compelling experience!

    The least MS could have done is make the price so competitive that people will think about it. They need the consumer and I mean really need them! They need to grow the market and they need to help/encourage other manufacturers by way of subsidy.

  • Re:XBOX? (Score:4, Insightful)

    by a_nonamiss (743253) on Tuesday September 24, 2013 @11:30AM (#44937299)
    It's part of their long-term strategy to get into the living room, which has been very successful. I know many people who have an Xbox for the sole purpose of accessing movie rentals, Netflix, Hulu Plus, and play an occasional game or two. Yes, there are devices (such as the Roku) that do this, but they don't play games.

    I'm not saying Microsoft is full of geniuses or anything. They've definitely made a lot of dumb errors over the years. They are most definitely chasing Apple in terms of innovation in consumer market. But I'm also saying that it's a mis-characterization that they're just burning piles of money for no reason. I actually respect that they're at least trying to work on a long-term strategy rather than just trying to shore up their numbers for next quarter by cutting costs. You can't build long-term market dominance by worrying about what happens next quarter. If you try, you end up like US car companies in the 1980's. They're still digging themselves out of the hole they dug by their shortsightedness, and none of them would even exist if it weren't for government bailouts.

    For all the grief that the Surface Pro has gotten, it's actually not a bad piece of hardware. I'm using one right now. The Surface RT is a steaming pile of dogshit, but the Pro makes an acceptable lightweight laptop that can also run touch-friendly apps. Nobody will buy a tablet that doesn't have any apps, and nobody will develop apps for a tablet that nobody owns. I don't use it for "Modern" apps very much, but Microsoft is trying to create a bridge between the desktop and the tablet. Windows 8 actually does this well, and paired with well-designed, reasonably powerful hardware, it's very usable, even for a power-user.
  • by Morpeth (577066) on Tuesday September 24, 2013 @11:43AM (#44937489)

    I'd mod you up if I could, but I've commented here myself.

    I have a first gen Surface Pro, and I think it's terrific (for the reasons you've stated as well as my own). I have a feeling the requisite MS bashing is keeping people from actually looking at them objectively. It's funny really, Google and Apple are just as much 'evil empires' as MS, but they're 'cool' and MS isn't for whatever reason. /. always had a bit of an anti-MS slant, but the trolls have really run away with it here the last few years. Ah well.

  • Re:XBOX? (Score:4, Insightful)

    by Bert64 (520050) <bert@slLIONashdot.firenzee.com minus cat> on Tuesday September 24, 2013 @11:49AM (#44937593) Homepage

    Two completely different pieces of hardware released under the same branding... MS have lumped them together in the same bucket.

  • Re:XBOX? (Score:5, Insightful)

    by Bert64 (520050) <bert@slLIONashdot.firenzee.com minus cat> on Tuesday September 24, 2013 @11:57AM (#44937735) Homepage

    They had fully functional x86 tablets long before the ipad...
    Apple could have made the ipad x86 (or ppc) compatible, and therefore able to run desktop osx applications...
    Android tablets can run existing linux applications with just a recompile (there are chroot setups for debian/ubuntu on android to provide the necessary libs etc).

    Fact is the ability to run desktop software on a tablet is not a selling point... Such software is awkward to use on a touchscreen, and just results in a subpar experience. Apple succeeded with the ipad mainly because it ran touch centric software and didn't encourage users to run existing non-touch software.

  • by thrift24 (683443) on Tuesday September 24, 2013 @12:36PM (#44938317) Homepage
    The only thing the surface does better than it's competitors is run a full fledged operating system, but what is the point of this?

    You mentioned you can run development tools on it, but why would you want to do that? I couldn't imagine attempting to lean back on the couch with a tablet and write code on a touch screen, it would be awful. Of course you can slap on the crap keyboard and sit down at a desk almost like it's a real computer... but then why don't you use a real laptop/desktop. You could run office, but why? You could run full blown outlook, but why?

    You say you want more than a tablet for mail/surfing.... Are you writing multipage emails on a tablet? What kind of surfing requires a full fledged OS?

    Surface Pro is the answer to a problem that doesn't exist.
  • Re:it's fun (Score:4, Insightful)

    by ganjadude (952775) on Tuesday September 24, 2013 @01:33PM (#44939249) Homepage
    that isnt the argument here, i agree with that. the argument is that microsofts offerings are too expensive if they want to get some of the market, they need to lower the pro model price by a good 200 300 bucks
  • by Missing.Matter (1845576) on Tuesday September 24, 2013 @01:36PM (#44939311)
    Before Surface I used to carry around a $900 ultrabook and a $500 iPad. After surface I carry around a single $900 device and it covers the functionality of both devices I used before for far less money, and at reduced size and weight. And the added pen functionality goes beyond anything the iPad was capable of. Do you refuse to recognize the utility of that?

    I couldn't imagine attempting to lean back on the couch with a tablet and write code on a touch screen, it would be awful.

    Of course this is an awful thought. Why would you even suggest this? No one here or anywhere has ever said Surface is good for programming on the touch screen. The idea is it's a tablet when you want a tablet and a laptop when you want a laptop.

    Of course you can slap on the crap keyboard and sit down at a desk almost like it's a real computer... but then why don't you use a real laptop/desktop

    Because when you leave the desk you can't take the desktop with you. And what do you mean a "real" laptop? Suface Pro is as capable as any laptop I've ever used. You say the keyboard is crap but the mechanical version more than sufficiently replaces my laptop's keyboard.

    You say you want more than a tablet for mail/surfing.... Are you writing multipage emails on a tablet? What kind of surfing requires a full fledged OS?

    The kind of surfing that involves flash. I can't watch hulu on my iPad, or any other flash dependent site. Or how about the kind of surfing that involves more than one page open at the same time. Surface can do this. iPad cannot. Or the kind of surfing where you download an arbitrary file and then work with it. A full OS can handle downloading anything. iPad cannot. Or in terms of emails, having an email open and a website or resource open next to it. iPad cannot do this.

  • Re:XBOX? (Score:4, Insightful)

    by Dogtanian (588974) on Tuesday September 24, 2013 @04:12PM (#44941425) Homepage
    Videos look interesting, I might check them out if I have time...

    The processor in the xbox 360 was a wholly custom part. It has extra components to encrypt and hash memory to and from main memory (only the hypervisor is hashed, the rest of memory is encrypted) as well as e fuses for locking out downgrades. It is also a 3 core part, definitely uncommon.

    I suppose this depends on what you mean by "custom". (I meant designed specifically for that machine from scratch, e.g. the Atari 800XL's ANTIC and GTIA processors, as opposed to its customISED, but based on the pre-existing standard design 6502C processor).

    I wouldn't have expected MS to simply place a bulk order for an off-the-shelf PowerPC chip from IBM's catalogue. For a deal that size, I was sure they'd get a custom-modified version (e.g. cores, clock speed, pins, unneeded features stripped, etc. etc.) Granted, the level of customisation you describe there is significantly higher and more complex than I'd expected.

    Even so, it can't be in the same ballpark in terms of development effort as the Cell, which (AFAIK) was basically an entire new architecture built from scratch. Strictly speaking that wasn't a custom chip since it's intended for other uses as well, but I'll still guess it was approaching (if not far more than) an order of magnitude more expensive than even the most generous budget for customising MS's PowerPC.

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