At industry watcher Canalys' recent Channels Forum conference, multiple leaders from the industry were seen debating the future of Microsoft's first-party hardware line, with many suggesting the Surface line may not be long for this world.
Canalys CEO Steve Brazier suggested Satya Nadella will, sooner rather than later, nix the Surface line of products, just as he has done with the Microsoft Band, his write-off of Nokia and, most recently, the shuttering of Groove. Brazier believes this is because Nadella is a "software guy, a cloud guy". He also referred to the financial performance of the Surface line as another reason to drop it, remarking, "...overall they are not making money. It doesn't make sense for them to be in this business."
Microsoft OEM partners, too, seem to still hold a grudge against the software makers foray into their space, with Lenovo and Dell executives present at the conference supporting Brazier's conclusion. Lenovo's COO Gianfranco Lanci even prophesied that Microsoft will kill the Surface line before 2019 - in a year, or even less. Dell's Marius Hass echoed these views, claiming the company will "probably slow it down a bit."
The crux of these predictions tends to rely on the relatively poor performance of Microsoft's hardware ambitions in comparison to not only the massive gains in the cloud but also the incredible growth potential of that segment. As Lanci put it, "Microsoft is making a lot of money on cloud, making a lot of money on Windows and Office, but losing a lot of money on devices. And frankly speaking, it is difficult to see why they should keep losing money."
While Nadella has certainly been far less hesitant than his predecessor about scrapping loss leaders instead of stringing them along, a total shutdown of the Surface line within a year seems highly unlikely, as the company has, instead of working to leave the hardware market, been doubling down, with the release of a new laptop and an all-in-one within the last year alone.
All of these products were released under Nadella's supervision and while the company may have had a near billion dollar write-off at the start of the product's lifecycle, the Surface line has grown immensely since and is a source of billions of dollars of revenue for Microsoft.
On top of that, the Surface line is quickly becoming one of the company's most well-recognised brands, alongside Xbox and Windows. Unlike services like Groove and Microsoft Band, which were not only unsuccessful but also largely unknown or unpopular, the Surface line is increasingly linked to the Microsoft brand itself. Killing it would not necessarily be a good move for the Microsoft brand overall.
If Nadella does kill Surface, it would come as quite a surprise, especially to customers, though Microsoft's shareholders may see sense in focusing on the products that have higher revenue and growth potential than first-party hardware.