By Richard Woods
Well, Microsoft’s earnings call came in on Thursday afternoon and it seems that the news wasn’t so good. Over the course of Friday, Microsoft’s (MSFT) stock plummeted a whopping $4.04, which is more than 10%. The problem is that the people that control the stock market don’t always understand technology or even the technology business. The general consensus seems to be that the Surface RT is a failure. Well I’m going to tell you why it’s not.
Since the release of the Surface RT back in November, it has received harsh reviews about how you can’t run any Windows software that’s not available in the Windows store. More recently, Microsoft has been selling these things at ridiculously low prices at various events (most notably for $99 at TechEd), then they started offering the keyboard attachment for free (a $119-129 value) then they marked down the price by $150 to a retail price of $349.
$349 is a great price for something that comes with a full version of Microsoft Office 2013, which is a pricey piece of software on its own. It would appear that Microsoft is trying to give this thing away to anyone that will take it.
Well, it’s true. Is that so bad of a thing though? Microsoft is facing the facts that they were late to the mobile game. They have to get market share however they can. We have to remember that the new Microsoft is not just a devices company but also a services company. An 8.9″ Kindle HD only costs around $269. An iPad 2 retails for $369. With the reviews that the Surface RT is getting they have to get these things into the hands of consumers.
The other issue is that it seems that the Surface RT was marked as a $900 million loss for Microsoft. In all fairness though, most businesses lose money in their first year and Microsoft is only 9 months into the tablet business. I understand that $900 million is no small number, but for a company like Microsoft that’s about how much I would think that it would cost to get into an already saturated tablet market.
Someone came to me the other day and asked me which tablet she should purchase for the business she was starting. She said she didn’t have a lot of money because it was a new business. The Surface RT was the first thing that came to mind as it seems that it is the most logical product for a startup business.
Others may want to wait for the next generation of Surface products. The next iteration of the Surface Pro will undoubtedly have all day battery life since it will have the fourth generation Intel processor and the next generation of the Surface RT will most likely bring Windows RT and Windows Phone closer together, making it a more iPad-like product, which is what everyone seems to want.
The more people that they can get to use the Surface RT the more they will sell their other products and services. We can’t forget that Windows isn’t just a desktop operating system anymore. It is a fully functional ecosystem that gives you a seamlessly integrated experience between your computer, your tablet, and your smart phone.
Windows 8 is new but people will learn to use it. It’s the next generation of Windows and Windows is the default operating system when you buy a computer. The tablet market is dominated by Android and the iPad at the moment, but when the Surface RT crosses your desk you may realize just how much more convenient it is that your tablet runs the same way that your laptop or desktop does. You may even consider going out and getting a Windows Phone.
Do people remember that when the first generation of the iPad came out everyone thought that the tablet was a fad that would never replace your smart phone or your laptop, so why could you ever really need one? Well the first generation became obsolete the day that iOS 6 came out and you couldn’t install it on the first iPad but here we are yet another year later and the second generation of the iPad is still being supported with iOS 7. In fact, even though the newest iPad model is the fourth generation, the iPad 2 is still for sale by Apple.
It is entirely possible that they are clearing out extra inventory and we should be getting closer and closer to the announcement of the next generation of Surface devices, but I think that it’s jumping the gun a little bit to assume that the reason that they are pushing these things out so hard is because the Surface RT is such a massive failure, because it’s not.
The Surface brand will come to thrive in the months and years to come. The second generation models are coming soon and they will fix any complaints that consumers have about the first generation models. In the meantime, Microsoft will continue to do whatever they have to do to get them in the hands of consumers. So expect a loss for now, because the tablet market is a war, not a battle.