Microsoft Sold Less than 900,000 Surface Tablets Last Qtr

| Analysis

While Apple sold 22.9 million iPads in the Christmas quarter, Microsoft shipped only about 900,000. After returns, the sell-through might have been as little as 680,000 according to NPD and IHS. In contrast, in the first quarter of iPad sales in 2010, deeper in the recession, Apple sold 3.27 million.

Recent reports from IHS iSuppli and NPD have painted a disappointing picture for Microsoft's Surface RT sales.

One of the major problems was the lack of customer familiarity with Windows 8. It seems they were expecting an easy-to-use tablet and ended up with a business-class notebook and a new, complex OS that wasn't very intuitive.

There were some other factors that led to problems with the Surface RT, causing slow sales and many returns.

  1. It wasn't widely available; distribution was focused on Microsoft's flagship retail stores where sales people could steer customers into buying a profitable (for Microsoft) keyboard.
  2. The Surface RT, with an ARM processor, does not run regular x86 binaries, everyday Windows apps. Customers may have been confused by that because of the hyped co-release with Windows 8.
  3. The advertising focuses so intensely on the keyboard that customers, in the market for a tablet, perhaps perceived the Surface as, in fact, a notebook computer.
  4. The Surface RT, designed to appeal to business professionals, doesn't have that futuristic look for the consumer who is desperate to leave the difficulties of a PC behind.
  5. Microsoft was late to a market that the leaders had figured out. Apple took the lead with consumers, but also locked up the educational and enterprise use (hotels, pilots, government). Apple's competitors went after the store-front tablets: Nexus (Google Play) and Kindle Fire HD (Amazon) and the Nook HD (B&N online). As a result, there has been no obvious niche for Microsoft's Surface RT, something that was designed to preserve the Windows/MS Office legacy, not necessarily to appeal to tablet customers. Being late to the game has not been a winning approach.

Some observers are saying that when the much more expensive Intel-based Surface Pro comes out on February 9th, able to run real Windows software and more widely distributed, that its appeal will pick up. I don't expect that alone to overcome all the problems I've listed here.

Comments

Lee Dronick

“One of the major problems was the lack of customer familiarity with Windows 8. It seems they were expecting an easy-to-use tablet and ended up with a business-class notebook and a new, complex OS that wasn’t very intuitive.”

I had a devil of a time with it. I suppose I could learn it, but as you say it isn’t very intuitive.

confused

“The Surface RT, with an ARM processor, does not run regular x86 binaries, everyday Windows apps.”

I thought the whole POINT of Surface was that it could run Windows software (esp. and namely Office).  Or was that only in the beta version? smile

MS, you should’ve kept with Courier.

John Martellaro

confused: Yes, a lot of people thought that—perhaps because Microsoft delivered a special version of MS Office for the Surface RT, compiled for the ARM processor. I’ve seen unflattering reports of that version of Office.

Jamie

Ouch!

And Ballmer doesn’t want their stuff on competing products, huh?

I can’t fathom why anyone would choose the pro over a new Macbook / Ultrabook, the differentiation just isn’t there. Or, perhaps the differentiation is just really unappealing.

Not quite the Kin all over again, but close. . . . wink

John Martellaro

confused:  I should add that there are many 3rd party apps that DO run on the Surface RT, but they have to be purchased through Microsoft’s app store online.

RonMacGuy

“I can’t fathom why anyone would choose the pro over a new Macbook / Ultrabook, the differentiation just isn’t there.”

I can’t fathom why any board of directors would keep Ballmer around…

aardman

The Surface (RT, but especially the Pro) seems to be geared to the person who wants (to tote) a tablet but needs (to use it as) a laptop.  That is a very, very narrow market segment.

wab95

John

There are intangible forces that act on a business with such power as can influence their performance and fate, indeed their survival, no less than do dark matter and dark energy influence the known universe in spite of their respective intangibility.

One of those intangible forces is mindshare. Mindshare is that force that, despite our inability to touch, manipulate or quantify it, orients people (clients and consumers in this case) to a concern’s products and services in such a manner that they feel personally invested such that these become integrated into their everyday conversation and lives. The objective indicator of this is that, when that product or service changes, or a new one is added or replaces the former, they have both an emotional and a behavioural response that affects not only the company, but the larger environment in which it operates (e.g. third party suppliers, the competition). This shapes the momentum of a company no less than does dark matter affect the spin of a galaxy or dark energy affects that galaxy’s directional velocity.

If ever there was proof of both the power and importance of mindshare on the directional movement of a company, Window 8 and the Surface, the vehicle of Windows 8’s grand entry into the mobile space, are its object lesson. Here is a product, a binary system in fact, in which MS have heavily invested and, by several indicators, need in order to be successful in creating a post-PC future. Not only have the client/consumer population not positively responded, they’ve paid it scant attention. The Surface is hardly setting the Twitterverse on fire. Were it withdrawn from shelves tomorrow, would consumers even notice? Certainly the tech community would, but what of the larger, non-geek, purchasing public? Doubtful; not until the Press informed them that the thing was gone.

In my view, this is the target of Apple’s competition and their supporters, to the extent that they are contributing to the late spate of bearishness on Apple - to diminish the company’s mindshare and replace it with a momentum - killing indifference. My feeling is that, at least in the immediate future, such attempts will have just the opposite effect; after all, who else out there is bringing any new ‘innovations’ to overshadow the supposed innovation dry spell through which Apple are allegedly going? In fairness, the Surface and Windows 8 were the sincerest attempts by any major tech company to do so, and, thanks to the mindshare trough that MS currently occupy, this has proved thus far abortive.

Apple’s mindshare has remained a potent force, and, in my opinion, remains poised to substantially contribute to its velocity when the company is next prepared to go full throttle.

Agee

John, shouldn’t that be FEWER than 900,00)?

KitsuneStudios

That is a very, very narrow market segment.

I think that’s still an open question. The Surface is ultimately just another immature offering in a crowded market. The Surface Pro is part of a new class of Ultrabook/Tablet hybrid.

I’m smack dab in the middle of that market segment, and the idea of getting a tablet with the power of an ultrabook, the software of a pc, and the drawing abilities of a cintiq at the $1000 mark is ideal.

Acer, ASUS, Dell, Samsung and Lenovo are all coming out with convertible tablets. ASUS and Lenovo are essentially laptops where the screen can be removed for tablet use, the Dell uses a swivel hinge similar to the old Tablet PCs, and Acer, Samsung and Microsoft are making standalone tablets which support PC peripherals. Lenovo, Microsoft, Samsung and ASUS all include a digitizing Wacom pen. In fact, samsung seems confident enough in sales of penabled tablets that they recently invested in Wacom to increase their supply efficiency.

Haswell is going to be the big kicker in this field, since it’ll allow similar processor speeds with superior graphics and battery life. We’ll see by the end of this year if the convertibles make a dent in the tablet market. If they do, there is the potential for a halo effect with developers for tile-based phone and RT apps.

b9bot

Why would the Pro sell any better? 3 quarters of the storage is taken up by Windows and malware. The cost is the same as buying a laptop or portable like the Macbook Air which is twice as fast and a lot more efficient and doesn’t get viruses and isn’t pre-loaded with malware.
I see Zune written all over Surface as a product.
Say goodbye to this product in less than a year.

aardman

@Kitsune.  No I’m not talking about convertibles and detachable screens from the other mfrs.  I’m talking about the surface with its physical configuration where the bulk of the machine’s components and weight sits behind the screen.  This is all wrong when you use it in laptop mode because it’s top-heavy hence the need for a kickstand.  Add to that the flimsy keyboard and I expect laptop mode ergonomics would be suboptimal:  Would it really be usable on an actual laptop? Or on an airline tray table?  Or anything other than a tabletop with enough real estate?

The thing is Surface isn’t being sold as a tablet that you can occasionally use as a laptop.  The message I’m getting is that it can replace your laptop and you get a tablet to boot.  I’m skeptical of that claim.  And I’m not even talking about the convertible tablet/laptop UI design choices that Windows 8 makes.

Curtis Quick

I have been enjoying using my Surface tablet for just over two months. I does all that I expected and even more. I was pleased to see that it supported multiple user accounts, unlike the iPad, allowing me to share my Surface with family and friends without worrying about my private information and preferences getting messed up. I am greatly aided by the fact that the Surface, unlike the iPad, allows me to have a split screen showing two apps side by side. I often like to have my email open on the side while I work. I also really like how the Surface, unlike the iPad, allows me to extend the tablet desktop onto an external monitor and allow me to display more applications at the same time. But one of my favorite things about the Surface is that it comes with the ONE app that I really ever wanted that the iPad does not include - MS Office. And it comes with all the bells and whistles I need for free on the RT! That’s a five hundred dollar value thrown in for free on a five hundred dollar tablet. iPad fans like to deride Surface for having few apps, but it really does not need as many as the iPad does. Surface comes with a full-featured Internet browser, unlike the iPad, that runs all my favorite websites just fine without the need for an app. Facebook, CNN News, LinkedIn, Googledocs, etc. It just works. Surface also allows me to add extra storage through a SD card, unlike the iPad. I can swap out cards whenever I want. Surface allows me to add external devices without purchasing an expensive adapter, unlike the iPad, through it’s USB port. Another aspect of the Surface that I feel bears mentioning is both the keyboard and the kickstand (neither of which the iPad offer). It would be so much less an experience if the Surface did not have its kickstand and no keyboard attachment point. I love to type on my Touch Cover with the Surface on my lap. It feels so natural and is very convenient. In fact, that is how I am writing this comment.

I had my concerns about the UI, but after using Surface RT for a while I can honestly say that Windows 7 seems very old and outdated in comparison. The Start Screen is just the old Start Menu in greatly expanded form. The UI makes sensible and enjoyable use of simple gestures either toward or away from the edges of the tablet to easily control the application and the UI. It took me all of three minutes to master. I have also come to enjoy making good use of the Windows key plus other keys to speed up my work.

Surface RT is lighter than a laptop and more powerful than a tablet. It is a great bridge device between the two. With the Surface I no longer need to carry my laptop when I travel. That saves a lot of weight. With Surface I no longer need to purchase a laptop to go with my tablet. That saves a lot of money. Surface does so much that an iPad can not do - it just flat out amazes me that others deride it so.

I can understand that the relative lack of availability has caused many to develop their opinions of the Surface based on pre-conceived notions. And many iPad fans will naturally feel that all other tablets must be inferior to theirs by design. To those I must say, “Think Different.” Surface is the new cool.

mblaydoe

Wow, what a bunch of generic corporate astro-turfing propaganda. Right out of the product brochure. And not one aspect of the article in question even addressed. This is obviously a simple cut-and-paste SPAM post.

mblaydoe

The above addressed to Curtis Quick

patrick

“Surface comes with a full-featured Internet browser, unlike the iPad, that runs all my favorite websites just fine without the need for an app. Facebook, CNN News, LinkedIn, Googledocs, etc. It just works. “

Wow, give me a break “Curtis”. If you want to astroturf at least make an effort not to be THAT obvious. MS is pathetic.

John Martellaro

Agee:  I did indeed think about “less than” vs. “fewer”. But for the sake of the math implication,  “<” ,  as opposed to strict English, which is debatable anyway, I went with “less”.  It was literary judgment call we make in this business all the time. See what fun we have at TMO?

Curtis Quick

To mblaydoe, I’m not sure what is meant by the term astro-turfing, but I want to assure you that I wrote the comment above as a response to the comments to the article that seem to reflect a lack of understanding about the merits of the Surface tablet. I really do own a Surface and I find it eminently useful and fun to use. I also own an iPad and an Android tablet, and I can tell you from my personal experience that they do not hold a candle to it. I wrote the comment and posted it hoping to highlight what I find most enjoyable about the Surface. Other Surface owners will write quite different comments, but I have yet to read one by a Surface owner that is not pleased with their product.

John Martellaro

Curtis Quick: I must thank you for a considered and thoughtful description of your use of the Surface RT.  I thought it provided some interesting insights, and it’s not often that our terrific readers have the courage to write thoughtful, intelligent comments—despite expectations of a combative reception.

As for the rest of the readers, and I’m talking to you “mblaydoe,” one must recognize that the Surface certainly does appeal to and meet the needs of a few people, and we can learn from them.

KitsuneStudios

@aardman: My post seems to have been eaten, so at the risk of doubleposting:

You bring up some good points. Personally, I think most of what I want can be accomplished in tablet mode, to the point where I’m considering buying one without the keyboard case, and using my spare wireless mac keyboard for PC shortcuts when necessary.

My one concern is that I use my ancient laptop to do creative writing in bed. (More productive than at my desk for some reason). I don’t know if I’ll be able to do this effectively with the Surface Pro without some kind of specialty lap desk.

Mike

I have been using a Surface RT for about a month.  I picked it up out of curiosity fully expecting to return it and wait for the Surface Pro.  Much to my surprise, I didn’t feel the need to do that.

Yes, there are a lot of nice ultrabooks out there.  But that is not what I wanted.  In fact, I have a very nice small netbook that continues to serve me well.  I was not looking for a desktop replacement.  I wanted a tablet that is a bit more useful than other tablets I have used.

One thing that never seems to be mentioned about the Surface RT is that with the Remote Desktop application you can operate whatever software you want as long as you have an Internet connection.  I use it for an online game I play that is a bit too much for the RTs processor.  Sometimes I run other “legacy” software through Remote Desktop just for the fun of it.  Otherwise it suits my needs just fine.  I hardly need to spend the extra $500 on a Surface Pro simply to play a game faster.  Those needing to run “legacy” software at times with no Internet connection will need the Surface Pro. 

I added a 64G card, so I won’t be terribly concerned about storage space for a while.

I have been perplexed by all the criticism of Windows 8 and Windows RT.  I found Win 8 easier to adapt to than any other previous versions of Windows, and I’ve long been an upgrade hater.  Maybe it is simpler with a touch screen.  Whatever the reason, I really don’t understand why so many have remarked about a steep learning curve. 

There seems to be a bit of confusion about Microsoft Office on the Surface RT.  Yes, it runs on the Surface RT.  The full version of Office Home and Student is preinstalled (Word, Excel, Powerpoint, One Note) It is not a preview version.  (This is not the case with Surface Pro.  Pro owners will have to purchase Office).

I suspect that a lot of the negative remarks are coming from people with unrealistic expectations.  It is not a desktop replacement.  It is not advertised as a desktop replacement.  That said, for my purposes It also just happens to do a better job of bridging the gap between the two than any other tablet I have used.

bdball

quote “That’s a five hundred dollar value thrown in for free on a five hundred dollar tablet.” /quote

Really? A $500 value that doesn’t include outlook or access? This is also a Home version, meaning you better not be using it for business use. I’ve used Quickoffice on my iPad for quite some time. I think I paid $9.99 at the time. It has handled all my document needs. If I’m going to do anything too fancy it won’t be on a 10” screen.

These people also don’t tell you how you have to worry about drivers on the darn thing. That is the last thing I want to worry about on my tablet.

Did Microsoft ever fix the problem that many users could get updates or updates from their Microsoft App Store? Just wondering.

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