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Microsoft doubles down on 2-in-1, enterprise-first Surface strategy

Gregg Keizer | May 21, 2014
Redmond wakes up and smells the coffee to focus on business and notebooks, ignores consumers and gives short shrift to tablets.

True. By skewing toward corporate, Microsoft avoids the price war in the consumer tablet market, and according to the company, also avoids Apple's iPad, which it dismissed as a productivity platform in several subtle -- and some not so subtle -- ways.

Surface Pro 3
Microsoft today pitched the new Surface Pro 3 as a notebook that just happens to be a tablet. But customers still have to fork over more for the keyboard, pricing the least-expensive model at $929. (Image: Microsoft.)

That's smart, said Gold, who pointed out that the Surface Pro 3's high prices -- stratospheric for the tablet market, high, too, for the Windows notebook market -- matter less to corporate customers, who are interested in how a device can boost productivity, not its base price.

Microsoft has had a profit problem since the Surface introduction, losing at least $1.2 billion in the last year alone. Focusing on business, where higher margins don't automatically preclude sales, was the right move.

"Microsoft can win, and it doesn't need to sell tens of millions of this device to be successful," argued Gold. "Rather, it can sell a modest number, perhaps two to three million, and still claim major success in validating the viability of the Windows tablet market."

Or at least the Windows 2-in-1 market.

Not everyone interpreted today's roll-out as a Microsoft pour-on-the-coals moment that simply sharpened its original strategy.

"I think this was a fundamental change in strategy," countered Patrick Moorhead, principal analyst at Moor Insights & Strategy. "Rather than being the ultimate productivity and creative consumption device, [the Surface Pro 3] is only a productivity device."

But even as he called Microsoft's original concept a failure, Moorhead joined the others in praising today's ploy. "Previously, [the Surfaces] weren't optimized for anybody, previously they tried to take on Apple with a frontal assault. That wasn't smart. Today they took a hard look in the mirror and asked 'What are we good at, what do people think we're good at. That was smart."

In general, the analysts were bullish on the restart.

"The enterprise is where they fit," Milanesi said of Microsoft. "And maybe it's best to think about [the Surface Pro 3] as where the next replacement cycle for PCs will go, and how something like it gives companies an upgrade path for their [current] laptops and PCs."

"I was surprised, actually," said Gold. "I was expecting to hear how they were trying to compete [in the tablet market], rather than how they were going to differentiate it within the notebook market. But notebooks are at the heart of the enterprise, so I'm reasonably bullish."


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