Microsoft Surface Pro Sold Out? Really?

If you follow Microsoft (NASDAQ: MSFT  ) , you know this was a big weekend for CEO Steve Ballmer and team. Saturday's rollout of its Surface Pro tablet, with 128GB, sold out almost as fast as it went on sale, according to Panos Panay, Microsoft's leader for all things Surface. Normally, that'd be a good thing; selling out of a recently released product is every retailer's dream. But therein lies the problem.

Announcing an item is "sold out" puts a positive marketing spin on a new rollout, so retailers have long manipulated the perception of sales results -- that's as old as retailing itself. As a longtime supporter of Microsoft as a legitimate undervalued stock play in the midst of transitioning to mobile and cloud computing, I'm pained to see Ballmer and Panay's latest ploy.

Leading up to the weekend
Unfortunately for shareholders, you don't have to look far to find concerns relating to Microsoft's Surface tablet. A glaring problem for the Pro is price. Getting consumers to spend between $899 and $1,000 (and that's without a keyboard) for a tablet was always going to be a challenge, let alone pricing the Surface Pro so it's directly in the firing line of Apple's (NASDAQ: AAPL  ) popular iPad. Yes, there are certainly differences that Microsoft believes warrants the cost, but for money-conscious consumers, it's not hard to imagine that some will decide to forgo performance for price.

Two more concerns arose before the Pro launch this past weekend: battery life and available storage. According to PCMag, the battery life of Microsoft's Surface Pro is a little more than half that of an iPad. Panay discussed battery concerns in a recent post, saying, "If you compare it to, say, a MacBook Air, you will quickly see that pound for pound in battery size vs. battery life, you will find optimizations that puts Surface best in its class."

Available storage space, after accounting for the Surface's bevy of preloaded apps, also made headlines, and not in a good way. The 64 GB version comes with 29 GB of available space, and the 128 GB Surface Pro gives users about 89GB to play around with. Again, these don't compare favorably, but they can be explained by Microsoft's "hybrid" approach to the Surface. It was never intended to be simply a music download, movie, or gaming tool, but a half-tablet, half-laptop device, providing users with PC-like functionality.

Surface Pro sells out!
Getting actual sales results from Microsoft is like pulling teeth. That's nothing new. Ballmer not-so-deftly sidesteps questions about Microsoft tablet sales, just as Google (NASDAQ: GOOGL  ) CEO Larry Page does when asked about Nexus sales. To Apple's credit, at least it shares iPad sales numbers: An impressive 22.8 million of them sold last quarter. Even without gracing us with specific figures, Google's early introduction of its Nexus tablets -- along with generally favorable reviews and multiple price points -- gives it an advantage over Microsoft in gaining tablet market share, let alone the challenge Apple's iPad presents.

Leading up to this weekend's release of the Surface Pro, getting a sense for Surface RT sales after its introduction a few months ago depended on which article you read. For every "sky is falling" scenario, there was another rumor shouting "Surface sales right on track!" So I didn't put much credence in the RT sales scuttlebutt, one way or the other. But giving Microsoft the benefit of the doubt regarding its tablet sales just got harder to do.

In the latest Surface-related blog from Panay, he states that the response to Surface "has been amazing." He added: "We're working with our retail partners who are currently out of stock of the 128GB Surface Pro to replenish supplies as quickly as possible." Hey, that's great news, right? Sure, until you read the nearly 100 comments by, almost exclusively, disgruntled Surface consumers. Based on nearly every one of the blog's comments, It's clear Microsoft is playing the retail "sold out" game to the hilt.

After doing some investigative work on their own, consumers responding to Panay's blog found that many Best Buy and Staples stores received nothing more than a demo version of the Surface Pro. As you can imagine, Best Buy and Staples "sold out" of Surface Pros in a hurry -- easy to do when you don't have any to begin with.

To date, I've given Microsoft some leeway in its Surface sales totals; there was too much disparate information to determine how things were really coming along. But according to some estimates, Best Buy and Staples received only 30,000 or so Surface tablets in total. For a much ballyhooed rollout? That's too obvious a ploy to ignore.

Panay's blog, and, even more importantly, the feedback from potential Surface customers, says it all: Microsoft is playing the game, and consumers are paying the price -- at least for now. Overcoming the price tag, limited battery life, and available storage concerns were going to be challenges for Microsoft, regardless. But letting the marketing department dictate the Surface Pro rollout, virtually ensuring it would be "sold out," could cost Microsoft dearly in the long run.

With the release of its own tablet, along with the widely anticipated Windows 8 operating system, Microsoft is looking to make a splash in the booming mobile computing market. How's it really doing? Can Microsoft make a dent, considering Apple and Google's head start? In this brand-new premium report on Microsoft, our analyst explains that while the opportunity is huge, the challenges are many. He's also providing regular updates as key events occur, so make sure to claim a copy of this report now by clicking here.


Read/Post Comments (9) | Recommend This Article (8)

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  • Report this Comment On February 11, 2013, at 10:28 PM, Drew9944 wrote:

    Thanks for being the first to report the manipulation Microsoft pulled to "play the 'sold out' card"... only shipped 30,000 Units of its Surface Pro to all its Best Buy and Staples Stores. What a joke. Obviously Balmer knew they wouldn't sell well. On top of that, where does Microsoft get off on continuing to CHARGE DELL, HP, Toshiba, Sony, Lennovo, Acer...etc. for Windows Software, now that its competing with them? Maybe they should all switch to free software Google will provide for word processing and internet connecting...etc.

  • Report this Comment On February 11, 2013, at 10:43 PM, marv08 wrote:

    "To Apple's credit, at least it shares iPad sales numbers: An impressive 17 million of them sold last quarter."

    Hm, nice article, but Apple's Q1/13 result sheet actually says it sold 22,860,000 iPads. (Where did you get that number?)

  • Report this Comment On February 12, 2013, at 1:48 AM, ugarfool wrote:

    "But according to some estimates, Best Buy and Staples received only 30,000 or so Surface tablets in total. For a much ballyhooed rollout? That's too obvious a ploy to ignore."

    I'm curious to see the real numbers. There were quite a few comments across blogs with commenters crying foul, claiming Best Buys only had 2 units a piece for the 128GB model. I couldn't judge if these were valid/real comments, what surprised me was everyone had the 64GB model in stock, and even the Microsoft Store was sold out (or "sold out"?) of the 128GB model. There were also some people talking about how their company purchased large quantities of surface pros for employees.

    Right now, I'm waiting for the dust to settle to form any conclusions about this roll out. I personally believe the Surface Pro will do okay or well. What has me suspicious are the reviews for the Surface Pro on the Best Buy site on launch day. How could there be reviewers who had been using the device for two months or make insightful comments on usage?... Only if hey were developers with dev units could I see any potential reviews, but none of them indicated this in their review. In addition, 3 of 4 of the reviewers had only left 1 review.

  • Report this Comment On February 12, 2013, at 2:10 AM, marv08 wrote:

    @ugarfool: Don't get fooled by these "reviewers" (one way or the other). There are obviously people who have nothing better to do, or get paid to produce this nonsense (not necessarily by MS or resellers, but more and more by groups with investment backgrounds). I am (well, to be more precise, my company is) part of a MS solution provider programme and I can guarantee you that, outside MS and (maybe) some largest scale customers, nobody had Surface Pro devices two months ago. We do some medical applications (which is a big money area) and requested one lonely testing device in December... we have not even received an answer until today. Not even a "No". MS was struggling to get these devices out and they are obviously not clear how to sell them, even today (I asked everybody in my office today, if they want to dance on their tables with a surface and, to protect the innocent, I am not quoting the answers I got).

  • Report this Comment On February 12, 2013, at 9:34 AM, phillyjr wrote:

    The article is not incorrect, but there are some important clarifications that I'd like to add. Yes, the available storage out of the box appears low, but the installed applications includes Office 2013, that's the REAL Microsoft x86 version of Office 2013. This means that there are not the compatibility issues assosicated with "compatible" products on either the Android or Apple platforms.

    Two other points. There is a microSSD slot. This means you add an additon 64GB of storage (that is easliy removable and transportable) for about $50. Second, if you have an Xbox, which means it is likely that you also have Xbox Live Gold, then you get UNLIMITED music downloads!!! You can download (yes available for offline us) as much music as the devices can hold. This same Xbox Live pass may be used on your Xbox, Windows desktop, laptop and phone! This is not something that Microsoft has done a good job at either marketing or tell us users about.

    Cheers!

  • Report this Comment On February 12, 2013, at 10:07 AM, ugarfool wrote:

    @marv08: As part of the MS solution provider program, if you work with MS Lync, I suggest you check out Damaka (http://damaka.com). They have a native mobile app called Xavy that let's you use the full feature set of Lync on Android and iOS. Their apps are currently free in iTunes and Google Play. Companies are rolling out iPads and Android tablets, in one case 40,000 iPads, thanks to Xavy.

    I find it funny MS doesn't have Lync support aside from chat for smartphones and tablets, including Windows RT... I wouldn't be surprised if they're hoping Surface Pro's selling point is full Lync functionality, though since it's a laptop, it doesn't give you the long life of other mobile devices. If Intel can release the new Haswell chips as promised, then the Surface Pro could be formidable, but that could be atleast 6-9 months from now, all lost market time for MS.

  • Report this Comment On February 12, 2013, at 11:28 AM, marv08 wrote:

    @phillyjr: Just to clarify: 1. While the "Pro" does indeed contain a full Office installation, it is important to point out that this is a trial version, the license is not included in the price of the device (the special Office version on the RT is included in the price of the device). 2. The Surface has a micro SD slot - micro SDXC to be precise, not a microSSD slot (a 64 GB microSSD costs a bit more than $50). This is a valid point for private users, but most corporations will not allow the storage of company data on micro SD cards. 3. Fully agree about the Xbox and music features - no idea why MS is not promoting these features better.

    @ugarfool: Thanks for the link to Damaka, I did not know about it! We do have a qualified Lync consultant, but so far no customers who have deployed Lync. Our clients are either still on the old Communications Server, or use other services (Cisco WebEx, GoToMeeting, Avaya Meeting Exchange) for now - large companies upgrade these solutions only slowly. But I will tell our guy about it, sounds interesting! Cheers.

  • Report this Comment On February 12, 2013, at 12:52 PM, chilero wrote:

    This is positioned as a competitor to ultrabooks and the MBA that can also be used as a tablet. This is a full PC. Battery and storage are similar to the MBA and other ultrabooks.

    The SurfaceRT is the iPad competitor.

    With regards to selling out, either you are correct and they held back supply or they underestimated demand (or a little of both). It definitely looks better selling out rather than having inventory that sits in Best Buy or Staples.

  • Report this Comment On February 13, 2013, at 7:36 PM, rsteadman4972 wrote:

    I work at a Best Buy and in my opinion I think MSFT was just being cautious with the inventory. My store got an intial shipment, sold through those, then got 2 more shiments in 2 days. Even after release we were still doing "pre-order" type reserves so customers could put money down to hold one of the next available. Then some store didn't even sell through their original shipments. We see the same with more expensive Apple products where some stores don't even carry products unless there is an Apple rep in store. Like the 128gb Ipads. I think MSFT was just being resourceful with inventory..plus a little "sold out" mystique thrown in.

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