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Microsoft’s Surface Only Half the Battle

Tue, 06/19/2012 - 7:35am
Andrew Berg

Microsoft yesterday unveiled the Surface, a new Windows-based 10-inch tablet aimed directly at consumers.  

The device itself is a milestone and a showpiece for Microsoft’s Windows 8 operating system, but will the new slate be enough to compete with Apple’s iPad?  

The Surface comes in two variations. Windows Surface for Windows RT comes running a version of Windows 8 made specifically for ARM processors. The Surface for Windows RT packs a NVIDIA Tegra-based ARM chip. 

The second version comes running Windows 8 Pro, and includes an Intel Core i5 Ivy Bridge processor. There are slight variations in the specs of each model. The Windows 8 Pro version, for instance, is slightly thicker at13.5 mm than its RT counterpart. 

After multiple failed attempts at releasing its own tablet, including the scrapped Courier project, the Surface emerges as a long-anticipated launch. 

Microsoft is banking on Windows 8 acting as a unifying platform for its mobile and desktop environments. While the company has not said whether existing Windows Phone devices will be upgraded to Windows 8, the user interfaces for the two platforms are nearly identical, both dependent upon a homescreen composed of what Microsoft calls "Live Tiles."

Surface for Windows RT will release with the general availability of Windows 8, and the Windows 8 Pro model will be available about 90 days later. Specific launch dates have not been announced. Both will be sold in Microsoft’s U.S. retail stores and on some of its websites.

Microsoft announced Wi-Fi connectivity for the Surface but said nothing about a cellular modem in either of the tablets.  

That fact alone shouldn’t affect its standing against the iPad. Industry analyst Chetan Sharma estimates that 6 out of every 10 tablets sold are Wi-Fi-only and do not have an embedded cellular modem. 

Jeff Kagan, an industry analyst, said in email notes that Microsoft’s success will depend on whether it can follow Apple’s lead and tie all of its devices together with a Microsoft-branded cloud offering, similar to Apple’s iCloud.   

As of the first quarter, Apple’s iPad controlled a whopping 63 percent of the U.S. tablet market. For that reason, Kagan believes that developing a great product only a fraction of the challenge for Microsoft. 

“Microsoft needs to update their brand,” Kagan contends, suggesting success depends on marketing and advertising as much as on the Surface itself. “Will customers see Microsoft as cool and with it, or as the loveable dear old Grandpa character.” 

Ronan de Renesse, principal analyst at Analysys Mason, said in notes that the Microsoft Surface is the best Windows-based mobile product attempt so far and will sell as long as it delivers its promises and is priced correctly, adding that the Surface is proof that PC manufacturers have lost the battle with mobile device OEMs.     

De Renesse contends that the Microsoft Surface is primarily a showcase for Windows 8 and Windows RT, suggesting this is just the first step.   

“Microsoft cannot sustain an aggressive device strategy while licensing Windows on tablets,” he wrote. “The big question is, if Surface (becomes) as successful as the iPad, will Microsoft choose to stop licensing Windows on tablets?”

Microsoft introduces the Surface as its OEM partner Nokia struggles to find its place in the smartphone game. Nokia last week announced that it would cut 10,000 jobs and close a number of manufacturing plants by the end of 2013. The company also sold off it Vertu luxury phone business. As a result, shares plunged more than 7 percent.  

Shares of Microsoft were up 3 percent in early trading to $30.  

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