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writedown costs and wasted advertising expenses prove as much.
But Microsoft vows things will change.
Microsoft CEO Steve Ballmer has already confirmed that more Surface devices are coming. Whether this decision is stubbornness or conviction depends a lot on your opinion of Windows 8 and the Modern UI, both of which play central roles in Ballmer's "one Microsoft" plan.
That plan is the basis for the CEO's recent reorganization of the company. Eventually, Ballmer sees Windows becoming less like a conventional OS, and more like an experience that users carry from device to device, with Microsoft's cloud stitching the pieces together, Bing's intelligence engine making the experience increasingly personal, and some of Microsoft's hardware fitting in among the endpoints.
It's a grand vision, but it requires Windows 8 adoption to pick up. The Surface tablets were supposed to show other OEMs Windows 8's potential -- but so far, potential losses are the only thing the devices have communicated.
This much is certain: Most companies would have folded after a Surface-sized loss, but Microsoft is rich enough to stick to its guns. If it uses its resources well, the next Surface tablets -- and by extension the Modern UI -- could still make a comeback. These seven moves would help.
1. Put Intel's Haswell Processor In Surface Pro
Here's a possible shopper's dilemma: For $1,000, would you rather have a MacBook Air that has a bigger screen, more storage, and 9 hours of battery life; or a Surface Pro with Type Cover that has a smaller (albeit nicer) screen, less storage, terrible battery life, and a tablet app selection limited by the sub-par Windows Store? There are reasons to side with the Pro, but at this price point, it's easy to see why Microsoft's tablet hasn't flown off shelves.
The MacBook Air's gets its great battery life from Intel's Haswell processor. With this chip, the next Surface Pro should offer battery life that's in line with other tablets, a lighter form factor, and -- thanks to Haswell's GPU enhancements -- snappier processing. But Microsoft needs to get moving. With Haswell-equipped Surface competitors, including other Windows 8 tablets, beginning to hit the market, the Surface Pro is starting to look even more non-competitive for its price.
2. Focus On Cost And Build Quality
The next Surface RT is rumored to have a smaller, 7- or 8-inch screen. But the Nexus 7 has already set the bar high in the mini-tablet market, and Apple is reportedly readying a new iPad Mini. Where can Microsoft compete in this crowded market? Cost and build quality. If Microsoft cuts corners, it's going to keep losing money.
The next Surface RT will reportedly use Qualcomm's Snapdragon 800 chip. This is a good start; the Qualcomm chip is much more capable than the current model's Nvidia processor.
But Microsoft can't stop there. The device needs a best-in-class screen, a magnesium alloy chassis -- the whole nine yards. And it needs to cost less than the iPad Mini.
If Microsoft pulls out all the stops, it might still lose money on a per-device basis. But if those losses lead to better adoption, and to making consumers, developers and businesses give a damn about the modern UI, it will be worth it.
3. Invest In Next-Gen Experience
At Build, Microsoft's conference for developers, the company showed off some intriguing Windows 8.1 capabilities -- such as 3D printing with the push of a button, and remotely controlling a Lego-constructed robot. Will these features lead to immediate sales? Probably not, unless 3D printer prices fall very quickly without Apple, Google or Samsung taking notice.
But these Win 8.1 experiences are still unique and that's a start. The Modern UI needs the popular apps that iOS and Android has, but it also needs novel and compelling user experiences that aren't available on other platforms. Simply putting Office on a tablet isn't going far enough. With the next Surface products, Microsoft needs to show that Windows 8.1 can be an appealing and unique experience.
4. Include LTE Support
The current Surface RT is outclassed by iPads and Android tablets in many ways -- but its lack of cellular support is a big one. After all, a mobile device is only as mobile as its access to data.
The next Surface RT's rumored Qualcomm chip should provide LTE support, and Microsoft will hopefully negotiate attractive data plan options. Microsoft has already made enormous investments in cloud technologies, and the company indicated at Build that Bing-powered mobile apps will be a future developer focus. To advance these ideas, though, the company needs Windows 8 and Windows RT users connected to the Internet as often as possible.
5. Price The Surface Pro Like A Companion Device
The Surface Pro is too heavy, too expensive and too limited by the Windows Store to be a great tablet. It's also too small and ergonomically compromised to be a full-time laptop. If viewed as a companion device, the tablet has uses. But if viewed as a single do-it-all device, the Surface Pro is only satisfying to niche users.
Unfortunately, the Surface Pro is priced more like a full-fledged computer. If the next Surface Pro maintains the first model's build quality, includes Intel's Haswell chips, costs a couple hundred dollars less and throws in the Type Cover for free, customers will perceive the device in a whole new light.
6. Get The Metro Version Of Office Out The Door
A version of Office optimized for the Modern UI is allegedly in development -- and the sooner Microsoft releases it, the better.
On most Windows tablets, including both Surface devices, Microsoft Office is a functional but sub-optimal experience. Microsoft is keeping Office from iOS and Android tablets in order to promote Windows 8, but so far, that strategy hasn't translated into strong Win 8 sales. But if Microsoft releases a version of Office that is optimized for tablets, and that actually makes productivity viable on small screens, the tactic could pay off.
7. Know Your Priorities
The Surface tablets have flopped because Microsoft misread the market. The company seems to have assumed that by simply throwing Office on a tablet, it could immediately command premium pricing.
This attitude focuses on market gaps -- on looking where competing products lack a feature, instead of where end user experiences can be improved. Business customers have always cared more about productivity and stability than about user experience. But BYOD and other consumerization forces have changed that, and now, Microsoft has to balance two goals: Keeping its products feature-rich enough for business, while also learning how to make great products that consumers actually want to use.
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