Here Comes Microsoft Surface 2

Microsoft (NASDAQ: MSFT  ) will reveal its next-generation tablets on September 23, but with consumers steering clear of the current Surfaces right now, should investors expect the company to do any better with these devices?

It can only go up from here, maybe
If you've been following Microsoft's tablet drama over the past few months, then you probably already know poor sales of the devices have kept the Windows and Windows RT operating systems at a combined tablet OS market share of just 4.5%. For reference, Android tablets have more than 62%. That led Microsoft to take a $900 million inventory writedown for the Surface RT devices earlier this summer. To combat poor sales, the company dropped the price of both tablets earlier, but so far it hasn't significantly helped sales.

Surface RT. Source: Microsoft.

Microsoft will likely ditch the "RT" designation altogether, which was a bit confusing in its own right, and will opt instead for the Surface 2 and Surface Pro 2 names. While this may help the company distance itself from RT's negative reputation, it won't solve the problem of offering two different operating systems. Microsoft will likely offer Windows RT on the Surface 2 and Windows 8 on the Surface Pro 2, leaving consumers continually guessing which tablet is for them and what the difference is between them.

Microsoft's suppliers don't seem too thrilled with Windows RT, either. The lower-end OS was designed to be less robust and thus require less battery power than the Pro tablets. But just last week, Lenovo said it didn't see a point in having the lower-end Windows RT because the new Intel  (NASDAQ: INTC  )  Haswell chip will offer high performance while maintaining all-day battery life.

While the overall design for both tablets is expected to stay the same, the company will likely increase the amount of RAM in the Pro version to 8GB, as well as add the new Haswell microprocessor. Intel has said its new chip can offer up to 50% more battery compared to its previous Core chips and has better multimedia capability. For the Surface 2, the Redmond company is expected to add a 1080p display and NVIDIA's (NASDAQ: NVDA  ) Tegra 4 processor. The latest Tegra chip is NVIDIA's most advanced mobile processor and is currently only in a handful of Toshiba and HP tablets. 

It aint getting any easier
While the updates will surely be an improvement, they probably won't be enough to combat Apple's (NASDAQ: AAPL  ) refresh of the iPad in October or Amazon's (NASDAQ: AMZN  ) refresh of its Kindle FIre line in the coming months. Rumors are swirling that Apple will bring a Retina display to the Mini, while the regular iPad will receive a slimmer bezel like the Mini already has. Though Apple's place in the tablet world has been slipping, it still enjoys 32% of worldwide tablet shipment market share.

Amazon's new Kindle Fires are expected to have a full external redesign, as well as new internals for both the 7 and 8.9-inch models. Unlike Microsoft's cheapest tablet, the smaller Kindle Fire offers an optional cellular data connection. Both tablets are expected to weigh less than their predecessors and the 8.9-inch is rumored to have more pixels than Apple's larger iPad Retina display.

Investors may not be satisfied with Microsoft's changes to the Surface in light of the competition. With Android and iOS completely dominating the tablet industry, Microsoft needs to pull out all the stops when it comes to design, functionality, and features of the Surface 2. If the rumors are true, I don't think the new Surfaces are going to cut it. Consumers already identify with Android and iOS, and Microsoft is still trying to build its name in the mobile world. The company also lacks the ecosystems synonymous with Google and Apple, and with Amazon offering such high-end tablets at inexpensive prices, the Surface tablets are likely to be outgunned and outpriced at the same time.

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Read/Post Comments (8) | Recommend This Article (6)

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 September 13, 2013, at 12:06 AM, FreeRange1 wrote:

    And the answer is.... who cares!

  • Report this Comment On September 13, 2013, at 11:10 AM, thethreestooges wrote:

    Nobody like RT tablet. Microsoft is trying to unload inventory of its older tablet by offering $200 trade in for a used iPAD.

    Must be joking, right? I will lose my iPAD and have to pay $150 more for a junky new RT tablet?

    Microsoft should target APPLE. It should try to be the second best by targeting Amazon kindle or Andriod tablets. Once you are in 2nd place, then you shoot for the #1 spot. Just don't do any cheap gimmicks like Google (Googleglasses), Samsung (smart watch) or Amazon (free smartphones)

  • Report this Comment On September 13, 2013, at 12:07 PM, josh995 wrote:

    The title of this article should be "Here Comes Another Microsoft Table That Nobody Will Buy!"

    Seriously? They lost 900 million, probably over a billion dollars now, on the Surface... They they're going to try again?

  • Report this Comment On September 13, 2013, at 12:09 PM, josh995 wrote:

    Wow the amount of typos in my comment is too damn high!

  • Report this Comment On September 13, 2013, at 1:26 PM, Cuftbll wrote:

    They are buying iPads for $200. That says enough about where MS is. I

  • Report this Comment On September 13, 2013, at 6:49 PM, Oril wrote:

    Almost everyone I know who own an iPhone, including myself say that when their contract is up they will seriously consider switching to one of the competitors with innovative new products, notably Blackberry, Samsung and Microsoft in that order. If the rumors of Microsoft acquiring Blackberry amount to anything that would be fantastic news that would likely vault the combined companies into first place over time.

    The fact that Apple derives 75 percent of its profits from the smartphone market and figures it can maintain that by coming out with essentially the same phone in plastic multi colors that cratered its shareprice last year is downright ridiculous and all the more reason to stay as far away as possible from the stock.

  • Report this Comment On September 14, 2013, at 1:33 AM, groberys116 wrote:

    Microsoft appears to be grooming their metro version to evolve into a system that will run on all devices. For my part I think that's a good idea. Imagine having the ability to run all your metro type apps on all the computer devices you own. I have several spreadsheets that I would like to be able to access on my phone tablet or desktop computer. Metro games would also fit in that category.

  • Report this Comment On September 14, 2013, at 7:29 AM, chuckyj1 wrote:

    Never understood the purpose of RT & it just confuses the heck out of the general customers and taking the RT name out of Surface 2... Will not clear up the differences of the Surface 2 vs. the Surface 2 pro. They should have totally dumped the RT this time around and only went with the Surface 2 Pro.

    Oh well MS is going to lose boat loads of money on the Surface 2 (RT model again)...Some companies never learn. I'm sure it will be overpriced too (which didn't help either model of the Surface 1)

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