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Microsoft's money pit: Surface has lost $1.2B

Gregg Keizer | May 20, 2014
CEO Nadella will unveil new tablets Tuesday, but can he stop the bleeding?

Although the $799 base price is $100 less than the lowest-priced 64GB Surface Pro 2 sold today, the combined tablet + keyboard package equals an out-of-pocket expanse around $900, still stratospheric for tablets, and in the realm of premium notebooks and the 2-in-1 hybrids Microsoft aggressively trumpets.

Minus a price-reduction strategy, Microsoft faces an uphill battle against the also-premium-priced iPad and a bewildering array of low-cost Android tablets. The smaller losses in the last two quarters are encouraging signs. But there are some other signals that the Surface is gaining ground, and doing it organically.

"Surface Pro is making some headway in corporate environments," contended Ross Rubin of Reticle Research. "One of the big draws for Surface versus competitors is legacy Windows compatibility, and its pricing is more geared toward corporate customers."

Fidel Deforte, the infrastructure and communications technology manager for the city of Cape Coral, Fla., agreed. In an email last week, Deforte outlined how he has begun replacing some senior managers' hardware — typically a combination of an iPad and a Windows notebook — with the Surface Pro. And saving money as he did.

"I replaced [a manager's] HP laptop and iPad (total value $2,600) with the Surface Pro 2 ($1,300) and she not only loves this, but sees that it is more flexible and efficient," Deforte wrote.

All that Nadella needs is millions more stories like Deforte's.

Microsoft will webcast the Surface event Tuesday, starting at 11 a.m. ET (8 a.m. PT).


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