Crunch time for loss-making Microsoft Surface

As Microsoft prepares to launch the Surface Pro 3 in New Zealand, overseas news services report the company may pull the plug on its tablet.

Gregg Keizer at Computerworld says Microsoft’s Surface lost money every quarter since first appearing in 2012. To date, the total loss is close to US$2 billion.

Keizer quotes Jackdaw Research analyst Jan Dawson, who says: “Continued losses will make it harder and harder for Microsoft to keep the Surface project going, so a good performance in the next quarter or two will be critical to justifying its continued existence”.

Nadella is impatient with Surface business

Microsoft CEO Satya Nadella hints at impatience with Surface. In July he said: “We are not in the hardware for hardware sake and the first-party device portfolio will be aligned to our strategic direction as the productivity and platform company”.

Surface was a gamble on Microsoft’s part. Apart from anything else, moving into hardware alienated traditional partners like HP, Dell and Toshiba. Because Surface is a tablet with laptop-like characteristics, there was a risk it would undermine the entire Windows PC market.

When I looked at the Surface Pro 2 last year, I said it doesn’t compete directly with Apple’s iPad but is a credible alternative for business users.

A tablet for Office users and Windows fans

Surface is suited to those who rely on Microsoft Office and other Windows software. It is well made and a pleasure to use. However, with Surface Pro prices starting at NZ$1300, the Surface is expensive compared to the iPad — although good value by laptop standards.

And there’s the problem. Surface sits somewhere between an iPad-like tablet and a traditional laptop. Or perhaps, given the financial evidence, we should say it is lost somewhere between a tablet and a laptop.