5 Reasons the Microsoft Surface Will Fail

Microsoft (Nasdaq: MSFT  ) is hoping that Surface -- the specs-rich tablet that it will begin selling on Friday -- finally makes it a legitimate player in the booming tablet market.

There are a few reasons to get excited.

  • Microsoft is hitting the airwaves with an ambitious marketing campaign.
  • The devices come installed with Microsoft Office at no additional cost.
  • The magnetically attached keyboard covers are pretty cool.

However, there are also plenty of reasons to be worried.

1. The price may be too high
The Surface -- without the keyboard cover -- starts at the same $499 price point as Apple's (Nasdaq: AAPL  ) iPad. Why? If Microsoft is serious about gaining market share early, shouldn't it be making setting itself up as the smarter economical choice?

Matching the iPad price will only force potential buyers to compare the two devices, and that's something Microsoft may not want right away, given the developer-backed ecosystem of Apple's App Store.

2. Windows 8 RT licenses may be too steep for its hardware partners
There could be a very good reason for the stiff starting price.

Tech site VR-Zone asked vendors at Asia's Computex convention what Microsoft was quoting them for a Windows RT license. This is the scaled-back operating system that the ARM-powered Surface is using. The quoted prices ranged between $80 and $95. Ouch!

That's pretty steep for tablet manufacturers that can just get Google's (Nasdaq: GOOG  ) Android for free as an open-source solution. They will have to bake that cost into the retail prices for their Windows 8 RT tablets, and perhaps Microsoft is simply doing them a favor by charging so much for the Surface.

It's not doing consumers any favors, though.

3. Microsoft's biggest fans may hold out for the Windows 8 Pro models
Early adopters want the best, and they're willing to pay up and jump through hoops to get it. Well, they'll be out of luck come Friday. It's just the ARM-based Surface that's hitting the market. The Surface models powered by Intel (Nasdaq: INTC  ) to handle the horsepower required by the more full-featured Windows 8 Pro will hit the market in a few months.

In other words, diehard Windows buffs may pass until they get the more powerful -- and naturally more expensive -- Surface model.

It's a big mistake to either not have both models out at the same time or to not put out the higher-end model first.

4. The market hasn't been kind to anything but iPads and Android tablets
Consumers want a tablet backed by an operating system that they know will be around for years, and that's pretty important. They knowApple will keep putting out annual iPad updates. They know that Android as an open-source technology has legs in mobile gadgetry.

Why is it that the webOS TouchPad and Research In Motion's (Nasdaq: RIMM  ) PlayBook sputtered? They hit the market last year at similar price points to what the Surface will be going for. They were selling for less than half that price a few months later.

Microsoft is going to fare better than that. It would be hard to do worse. However, if Android tablets will be cheaper and iPad tablets will be cooler, there has to be more than simply native Microsoft Office support to sway consumers who have been burned before.

5. Zune? Kin? Surface?
Aside from the Xbox, Microsoft hasn't had a lot of success outside its software stronghold. It was patient with its Zune portable media player. It wasn't patient with its Kin smartphones.

Even the name of the new tablet was first used for its expensive touchscreen systems that failed to gain serious traction.

Consumers have every right to tread carefully here, especially when Apple may be stealing Microsoft's thunder a few days earlier with what's likely to be an iPad Mini announcement. Google, meanwhile, just announced a sleek Chromebook selling for half the price of the Surface.

Scratching the Surface
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Longtime Fool contributor Rick Aristotle Munarriz has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple, Google, Intel, and Microsoft. Motley Fool newsletter services recommend Apple, Google, Intel, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (20) | Recommend This Article (17)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 21, 2012, at 10:11 PM, Fruitfan wrote:

    I agree that at 499.00 people are going to buy the iPad. The 499.00 and over market is almost 100% Apple. The overall market share for all price points is around 65% for the iPad with virtually all others selling in the sub 300.00. If the iPad mini is priced under 300.00 Apple will likely claw back to around 80% of the market. Microsoft is considered a buggy mess that few are fans of but many use out of not having another choice but the tablet market is a clean slate and Microsoft does not have a hold on the market like they do in PCs. The more powerful pros coming in a few months are rumored to be around 1000.00. For that I would buy an ultra book or a MacBook. The surface might have a small chance in the enterprise market but even that market is starting to adapt to IOS due to the high number of iPhone and iPad users.

  • Report this Comment On October 21, 2012, at 10:36 PM, Nomadder wrote:

    I'm just baffled that MS is throwing out the gimped version on its own first.

    The version that a lot of people will be returning.

    Returning, without the real version even available to upgrade to.

    I actually like the thing (the real Intel one), but I just don't get this. The ARM tab is an abomination and shouldn't even exist. It will only cause confusion and disappointment.

    Why would they do this unless they wanted their product to fail?

    Frustrating.

  • Report this Comment On October 22, 2012, at 12:04 AM, Klippenstein wrote:

    I think you fools know better than to write stuff like this. It cheap, common, trashy and too opportunistic for the likes of you. Most disappointingly, it does not really facts. If Surface RT and Windows 8 were just another tablet or iPad, I could see your point. But you know it is not. With Windows 8, Microsoft has done what no one so far has done: combine into one hardware device a tablet and Windows desktop interface (2 in 1). Apple's alternative of iPad and MacBook would cost over $2,000 whereas Microsoft's innovation will cost 1/5 to 1/3 of that. Sure the Surface RT, unlike Surface Pro and other Win 8 devices, are not based on intel chip arch. Therefore they will require programs to be rewritten and recompiled to work on its arm chipset, but unlike iPad or android tablets, it is still a PC with a fully functioning desktop user interface. Besides office, how many legacy programs do you really need. I can only think of two: Quicken and a custom ebook reader that might not yet be out for Surface RT. Where it not for these two (relatively unimportant programs, in my case) the Surface RT would be as useful as the Surface Pro. THAT is a huge difference and justifies the pricing I have seen.

  • Report this Comment On October 22, 2012, at 12:11 AM, ivisionary wrote:

    I am looking for low price tablet which is easy to use with reliable apps. If Surface is selling under $200, I would not buy iPad/mini or Andriod tablets. If Surface is selling at $400+ price level, there is no need to buy Surface, Other lower-priced gadgets can serve the needs for my daily use. Microsoft (executives) would not take the risk to sell Surface at a cut-throat price to gain the tablet's market share, I believe.

    When PC dies in the future sooner or later, no large consumer market share would be left for Windows product and its software family. I use smart phone or tablet daily which are non-Windows products and I don't need to touch a PC.

    Gaining market share in the tablet market by lowering the price of Surface would allow the Windows experience to continue in people's daily life. Popularity is the key for long term survival strategy.

  • Report this Comment On October 22, 2012, at 12:17 AM, Klippenstein wrote:

    [Version 2, with edits] I think you fools know better than to write stuff like this. Its cheap, common, trashy and too opportunistic for the likes of you. Most disappointingly, it does not really deal with the facts. If Surface RT and Windows 8 were just another tablet or iPad, I could see your point. But you know it is not. With Windows 8, Microsoft has done what no one so far has done: combine into one hardware device a tablet and Windows desktop interface (2 in 1). Apple's alternative of iPad and MacBook would cost over $2,000 whereas Microsoft's innovation will cost 1/2 to 1/3 of that. Sure the Surface RT, unlike Surface Pro and other Win 8 devices, are not based on intel chip arch. Therefore they will require programs to be rewritten and recompiled to work on its ARM chipset. For that you get longer battery life, all other things being equal. But unlike iPad or android tablets, it is STILL a PC with a fully functioning desktop user interface. Besides Office (which ships with the machine), how many legacy programs do YOU really need? I can only think of two I need: Quicken and a custom ebook reader I am currently using for a course, that might not yet be out for Surface RT. Again in my case, where it not for these two (really not critical programs) the Surface RT would be as useful as the Surface Pro. I expect Quicken and other common programs will soon get rewritten for ARM. So if I am patient I can reasonably expect that it could turn into my no compromise PC. THAT is a huge difference and justifies the pricing I have seen. Microsoft is right to charge more to increase its profits while at the same time saving customers a lot of money!

  • Report this Comment On October 22, 2012, at 2:11 AM, SuntanIronMan wrote:

    Android isn't free anymore (not to the manufacturers). Pretty much every major Android hardware manufacturer is now paying Microsoft somewhere between $10 and $15 for each Android device they sell. Google is offering it for free, but there are costs for a manufacturers to use Android OS for their devices.

    I do agree with you about #3 though. I want a Surface, but I am waiting for the Intel version. Or by that time there may be a Windows tablet by a 3rd party manufacturer that I want to buy. Previews of the HP Envy x2 have been pretty positive.

    However, the 32 gig Surface with no touch cover is already on backordered, so maybe we are both wrong about #3. Although saying something is backordered without indicating so many were offered isn't saying much. Microsoft could be intentionally offering a small supply to give the appearance people rushing to preorder. Who knows?

  • Report this Comment On October 22, 2012, at 9:54 AM, RandomMeaning wrote:

    RT's main problem is that it's most likely going to be sidelined in the near future. MS reacted perhaps a little too quickly assuming that Intel wouldn't be able to manufacture a chipset that could meet their mobile needs went with the Qualcom style set but had to go with a "cousin" version of Windows (whether the current mobile Intel chips would work I'll let others debate the merit of). I think it's just a matter of time before RT gets neglected and then forgotten. Sure, they'll start out with bold statements and heart-felt promises but their main effort is going to into the Intel driven devices.

    Microsoft comes up with many ideas, good and bad, but many die because MS doesn't follow up with steady support. I doubt their dedication to the future of the RT version of Surface.

  • Report this Comment On October 22, 2012, at 11:37 AM, chilero wrote:

    Initial stocks of the Surface, available for pre-order, have sold out and now you will have to wait an extra 2 - 3 weeks. This has been reported for the US, UK and Canada so while initial stocks are unknown, that is a good sign.

    I don't think MSFT is trying to compete with the cheap plasticy Android tablets in the $200 mark. It is aimed clearly at the iPad and still comes in roughly a $100 cheaper and includes Office. They are not trying to sell the product at a loss to gain market share, instead they are looking to profit on these. That should be applauded. For certainly if they had tried to sell it cheaper, at a loss, they would have been vilified.

    They are also incredibly innovative devices with an innovative OS.

    What you also find in these articles is a continuous reference to the Kin and Zune. Past success doesn't guarantee future success. Past failure doesn't guarantee future failure. Neither the Kin, nor the Zune had Windows behind it nor a worldwide launch. Make sure to include Apple maps and Ping in all future Apple articles.

    Apart from the Kindle and possibly the Nexus 7, no Android tablet has had any relative success.

    Competition is good and just because one company seems to have a lock on a segment does not mean that they can hold that forever and nobody should make an attempt at gaining market share. Most articles seem to be written this way, especially when talking about Apple. They have a lock on such and such and therefore no other company should even try compete and they should just give up and let Apple have it.

    "Consumers want a tablet backed by an operating system that they know will be around for years, and that's pretty important. " Exactly what Surface offers in Windows.

  • Report this Comment On October 22, 2012, at 11:55 AM, Fruitfan wrote:

    As I read all the post from the Microsoft fan club I have to wonder how many times their computers froze up or needed to be restarted.

  • Report this Comment On October 22, 2012, at 12:57 PM, wrenchbender57 wrote:

    Just got back from a visit with my daughter and her husband. Her husband already has a copy of Windows 8 on his phone and he absolutely loves it. He has tried Android and IOS. His opinion is that this (Windows 8) is the best system he has seen so far. In fact, if his current carrier does not offer the phone that supports Windows 8, he said he will reluctantly switch carriers. He loves the fact that he is familiar with the basic way Windows works and how it interfaces with his desktop. I am betting there will be many more like him that decide to buy the Surface with Windows 8 when it finally comes out.

    The price of the Surface with Windows 8 is very competitive when you look at it as a lightweight alternative to a laptop. Which is really what it is.

    It will be interesting to see how this plays out, but I am betting that MS will do well with this.

  • Report this Comment On October 22, 2012, at 1:05 PM, wrenchbender57 wrote:

    Think about it this way: If you are looking to buy a light, fast, small computer device to take on trips what are your choices? A lightweight laptop for over $1K or a tablet computer for around 1/2 of that? The choice is obvious. And, you usually don't have to take your tablet out of your carry on when going through airport security. Less weight, smaller size, more convenience for a price much less than a laptop. And now with an operating system that is familiar to many and interfaces with their home computers easily. From this perspective the Surface is sure to be a winner IMO.

  • Report this Comment On October 22, 2012, at 2:31 PM, Fruitfan wrote:

    The problem is that windows 8 looks to be a major change from the versions everyone is used to so the idea the interface is gong to be smooth from tablet to desktop is BS. Plus the 499 price point is not even running the full version. This is going to be another epic fail from Mr. Softy

  • Report this Comment On October 22, 2012, at 5:31 PM, chilero wrote:

    Of course the fact that 500 Suning stores in China may help sales as well

    http://www.neowin.net/news/microsoft-surface-to-be-sold-in-5...

  • Report this Comment On October 22, 2012, at 6:32 PM, toph36 wrote:

    I disagree with this article. No, the Surface and other RT tablets will not dethrone the iPad any time soon, but it will be a success. Can't wait to get mine!

  • Report this Comment On October 22, 2012, at 7:29 PM, TheRealRacc wrote:

    Surface being compared to the $499 iPad only hurts the Surface, because it is so much more than that.

  • Report this Comment On October 22, 2012, at 8:35 PM, Jurobi wrote:

    Y'all are funny. The "Death of the PC" has been predicted periodically since 1995. Tablets are OK for surfing the net and light note taking. But to do real work requires a PC. Tablets lack the power, the graphics, the flexibility, the upgradeability, the speed and the ergonomic user-friendly interfaces of the PC. I expect the PC will be around long after the tablets are consigned to the waste bins of history.

  • Report this Comment On October 23, 2012, at 1:43 AM, itsy1958 wrote:

    I don't think the PC will "die" anytime soon, but I don't think the tablet will ever be done away with either. They're just too convenient and one doesn't *always* need a PC at hand. I feel both will be around for a good time to come.

  • Report this Comment On October 23, 2012, at 5:38 PM, lucasmonger wrote:

    Apple's $329 iPad mini announcement is sure to disrupt Microsoft's $499 entry price point. It's now a matter of whether there will be enough supply for the demand right before the holiday season. iPad mini availability, if constrained, might cause people to buy something else. Only time will tell whether the demand for Surface will continue beyond the first adopters.

  • Report this Comment On October 26, 2012, at 11:03 AM, gamountainhiker wrote:

    "Microsoft's biggest fans will hold out for the Windows 8 Pro models", so on target. As a web master/developer, I have no alternative but to wait for the Pro models in order to get such features as IIS web server on the laptop. But the real kicker is PRICE. Henry Ford know that if you want to be a leader, you have to have a product priced to appeal to the LARGEST market possible, not the richest market. These days, the corporate business market may be rich but when it comes to buying tech, they fall into the rest of the pack at the midpoint - remember who is STILL running XP!

  • Report this Comment On November 12, 2012, at 6:38 AM, thidmark wrote:

    If Surface has USB ports, it has a better chance of getting my business over Apple. I love the iPad, but it's pretty useless for me.

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