Why Is Microsoft Setting More Money on Fire with Surface 2?


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Pop quiz: Imagine you spend millions of dollars?and an untold number of engineering and design hours?on a new product that you hope will prove a bestseller on the open market. Instead, that product crashes and burns so badly that you?re forced to take a $900 million write-off on unsold units. Do you?

A.) Discontinue a product that nobody seems to want.

B.) Continue to sell the product, but resolve to never throw good money after bad by building a follow-up.

C.) Pump a whole lot of money into creating a next-generation version of the product, but don?t radically alter its fundamental properties.

Microsoft has gone for option C.) with its Surface tablets. 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. But in updating its Surface portfolio, Microsoft still opted for iterative upgrades rather than a total revamp: the Surface 2 and Surface Pro 2 (the former contains an ARM-based chip and runs Windows RT, a version of Windows 8 built for that type of processor; the latter packs an Intel chip and ?regular? Windows 8) feature some improved hardware specs and new accessories, but otherwise look pretty much the same as their predecessors.

The Surface 2, in keeping with tablet trends, is physically lighter than the first version; it also packs a Tegra 4 processor and Windows 8.1. The Pro 2 boasts better battery life (a major complaint about its predecessor) and an Intel Core i5 Haswell processor; Microsoft also reengineered the built-in kickstand to better remain upright while in people?s laps. The accessories?a key selling point with the Surface?include improved keyboard covers and a new ?power cover? that extends battery life, along with a docking station for the Surface Pro.

Microsoft is still positioning the Surface as the best bet for people who want a tablet capable of ?real work,? as if keyboard attachments and productivity software somehow aren?t available for alternate tablets on the market. It will surely pour more money into the manufacture and marketing of these new devices. But to what end? The device?s first generation forced the company to take a gargantuan write-off on unsold units?it?s not as if people were fighting each other in the aisles over the last available Surface RT.

So why is Microsoft continuing the endeavor? Back in October 2012, outgoing Microsoft CEO Steve Ballmer released a widely circulated memo that suggested 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 if this second generation fails like the first, it?s questionable how long Microsoft will continue with this bruising foray into the device-manufacturing space.

http://slashdot.org/topic/cloud/why-is-microsoft-setting-more-money-on-fire-with-surface-2/

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You should compare to how much Xbox lost when it first game out. Yet people consider it a success.

 

 

In case you're too lazy, they've lost 4 billion on xbox before their first profit.

 

 

In other words, 900 million is hardly anything to be worried about. Surface will be fine.

 

 

????  Did you just comment then attack yourself?

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People keep forgetting why Microsoft is willing to write off the loss on Surface.

 

It's pushing their other products.

 

Office, Windows 8.1, Windows Phone, Skydrive, plus brand recognition. It's a neat little device. I don't want one. I can't afford one and I don't need one, and that's true of many people. But I think it's a neat device. So long as it exists, I think "Microsoft equals neat devices" and that thought alone is worth millions of dollars.

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It may not be obvious to the common person or internet blogger, but Microsoft believes there is a market for it. I believe it's obvious they are looking at the business market and not just the average consumer. The iPad and android don't come close to what Surface with Windows can offer from an enterprise perspective.

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Sounds like an article written by someone who never used a Surface.

 

Do you have to use a Surface to see money going out, but not coming back in?

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A lot of Microsoft products exist to keep the company's competitors from gaining a larger stake in the market. For instance, Microsoft is sinking money into Bing in an attempt to limit the influence of Google; the Xbox division is doing the same to compete with Sony, with neither company making much?if any?money; Microsoft bought up Skype at a dramatically inflated price to limit the influence of Facebook after the decline of Windows Live Messenger.

 

The question is whether it's worth competing in a market simply for the sake of competing, if there's no money to be made from it. Microsoft can afford to do that while Windows and Office continue to rake in the money but such a strategy might prove more challenging as competition increases. The problem is that these massive multi-billion dollar companies are destroying the market for the smaller players, as Microsoft and Google can afford to sink billions into various ventures without any return on investment. Regulators have failed to keep these companies in check.

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It may not be obvious to the common person or internet blogger, but Microsoft believes there is a market for it. I believe it's obvious they are looking at the business market and not just the average consumer. The iPad and android don't come close to what Surface with Windows can offer from an enterprise perspective.

 

Yeah they do.  They offer cellular connectivity which can be really important to business customers. People on the go won't want to add or bring more devices to get connected to the office.  It's why Microsoft is coming out with an LTE Surface, but only eventually.

 

Also, I though blackberry did a good job of showing why you can't cater to the business only crown and make a profit.

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You should compare to how much Xbox lost when it first game out. Yet people consider it a success.

 

Xbox had one contender and was selling more than PS3.  It was going to make money, the questions was just when.

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No, but the author hasn't given any reasons why Surface 2 will fail other than Surface 1 failed.

True, but using a Surface won't change that.

 

That said, Google does this with Nexus devices.  It is on a smaller scale, but they don't really profit on them either.  They serve a purpose though, to showcase their latest software.

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No, but the author hasn't given any reasons why Surface 2 will fail other than Surface 1 failed.

 

It may be that people just don't want surface.  Look at Apple, people say they don't innovate any more and only release minor product updates, yet their products sell more every year.   Maybe people won't keep buying Surface even though it's an improvement on the overall hardware.

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A lot of Microsoft products exist to keep the company's competitors from gaining a larger stake in the market. For instance, Microsoft is sinking money into Bing in an attempt to limit the influence of Google; the Xbox division is doing the same to compete with Sony, with neither company making much?if any?money; Microsoft bought up Skype at a dramatically inflated price to limit the influence of Facebook after the decline of Windows Live Messenger.

 

The question is whether it's worth competing in a market simply for the sake of competing, if there's no money to be made from it. Microsoft can afford to do that while Windows and Office continue to rake in the money but such a strategy might prove more challenging as competition increases. The problem is that these massive multi-billion dollar companies are destroying the market for the smaller players, as Microsoft and Google can afford to sink billions into various ventures without any return on investment. Regulators have failed to keep these companies in check.

It's clear business strategy. Microsoft owns what, 90% of desktop share? Why would they give up that marketshare to google and their ad services? It's not always about making more money than your competitor, any use of bing is less revenue to google, which is a win for Microsoft. The fact that search services are integrated into just about every internet connected device justifies the existance of Bing, Microsoft doesn't want to allow their competitor to perform those services on top of their platform. And the development of Bing will and has led to a lot of useful and interesting technology that will be used in the future that may make revenue for Microsoft.

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Yeah they do.  They offer cellular connectivity which can be really important to business customers. People on the go won't want to add or bring more devices to get connected to the office.  It's why Microsoft is coming out with an LTE Surface, but only eventually.

 

Also, I though blackberry did a good job of showing why you can't cater to the business only crown and make a profit.

I agree somewhat. There are alternatives for internet on the go such as mobile hotspots. An always connected device also presents a security issue for most businesses, so they may not want that in the first place.

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No, but the author hasn't given any reasons why Surface 2 will fail other than Surface 1 failed.

 

First gen Android phones where horrible and failed.

 

shoudl android have been abandoned

 

First and second gen android tablets where terrible, should they have been abandoned(heck when Samsung launched the new 7 inch galaxy tablets, they literally ignored/purposely forgot about their original 7 inch android tablet that could also do phone calls. and called it their first 7 inch tablet...)

 

So yeah, Surface will be fine. Surface 2 was also in development since the launch of the originals. 

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Xbox had one contender and was selling more than PS3.  It was going to make money, the questions was just when.

 

 

huh ? 

 

firstly it had 2 contenders, secondly of course the xbox was selling more than the PS3. the PS3 didn't exist when the Xbox was released. 

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It may be that people just don't want surface.  Look at Apple, people say they don't innovate any more and only release minor product updates, yet their products sell more every year.   Maybe people won't keep buying Surface even though it's an improvement on the overall hardware.

What kind of people? Like I said, consumers, probably not, but I think Microsoft's real target audience is businesses, and then it will trickle down to consumers.

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