Dec 15, 2012 (04:12 AM EST)
Can Microsoft Surface, Best Buy Save Each Other?

Read the Original Article at InformationWeek

Microsoft Surface Tablet: 10 Coolest Features
Microsoft Surface Tablet: 10 Coolest Features
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Microsoft said this week that Best Buy would carry the Windows 8 Surface RT tablet. Best Buy is bleeding cash, and Surface sales are slow --so it's a bit like pairing a cardiac case with an asthmatic. But if managed right, the combination could help both patients get off life support.

Microsoft has not commented publicly on Surface sales, but some analysts have said that they are running below the company's expectations. Analysts at Boston-based brokerage firm Detwiler Fenton last week pegged sales of Surface RT at between 500,000 and 600,000 units since the product launched on Oct. 26. By contrast, Apple sold 3 million iPads in three days following November's debut of the iPad Mini.

"Lack of distribution is killing the product," Detwiler Fenton said of Surface, in a research note published before the Best Buy deal was announced. Surface RT is also now on sale at Staples.

[ Will Microsoft introduce more hardware products beyond Surface? CEO Steve Ballmer suggests it's likely. ]

Just 4% of tablet buyers surveyed this week by Ipsos said they would choose Surface. Sure to be hurting sales is that until now it's been very difficult for potential buyers to literally get their hands on a Surface tablet. It had been available only through Microsoft's online store or at the handful of brick-and-mortar locations Microsoft has opened around the country.

Without being able to touch and feel the tablet, which is made of a cutting-edge alloy Microsoft calls VaporMg, consumers were likely to pass. That's where Best Buy comes in. The chain is hurting because shoppers will often kick the tires on products on its show floors, and then buy online for a lower price -- often tax free. That doesn't do Best Buy much good, but it does boost sales for the vendors whose products the store carries.

So how could Surface help Best Buy? At the very least, the widely hyped system is likely to increase foot traffic during the crucial holiday season as curious shoppers look to see what it's all about. Even if they don't buy the tablet, they might stock up on PC accessories and the like, which the chain sells at considerable mark ups.

That alone won't be enough to save Best Buy, which posted a net loss, after charges, of $13 million in the third quarter. But it's a start, and new CEO Hubert Joly appears to have some good ideas for moving the business forward. When he came on board in September, he spent a week working the floor at Best Buy stores, blue shirt and all, to gain a better understanding of the challenges faced by sales staff.

That led him to try to combat the "try here, buy elsewhere" problem by authorizing sales reps to negotiate price discounts on the spot. Best Buy founder Dick Schulze, meanwhile, is looking to take the company private.

Tech makers, including Microsoft, would do well to support Joly's efforts as much as they can. If Best Buy goes down, like its former rival Circuit City did, consumers will have few options when it comes to seeing the newest gadgets in action. A PC, tablet or phone isn't like a song or movie file -- you can't download a preview before buying.

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