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Microsoft Makes 2 Surface Mistakes

By Ashraf Eassa – Oct 21, 2013 at 5:05PM

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While Microsoft is a cash cow with an amazing business, the Surface launches look - again - to miss the mark. Will Apple and Google will capitalize on Microsoft's mistakes?

Tomorrow marks the official launch of the Microsoft (MSFT -0.31%) Surface 2 and Surface Pro 2 devices. Reviews on both of these tablets appear to be largely mixed. The issue with the Surface 2 is that, despite a well-designed chassis, great screen, and much-improved touch interface, the app selection is scarce and since it's powered by an ARM processor, it's forced to run Windows RT, which means no traditional Windows support. The Surface Pro 2, on the other hand, offers full PC performance, but in exchange comes in a bulky form factor and doesn't have great battery life. The frustrating part about all of this is that these issues were very easily avoidable.

Surface Pro 2 uses the wrong chip
The Surface Pro 2 is bulky, largely because it uses the wrong processor. Microsoft decided that it would be a great idea to shove a 15W, full Ultrabook processor into a 10.6" tablet chassis. It's difficult to see the justification for this. Microsoft could have easily chosen to use Intel's (INTC -2.79%) 6W "Y" series processors for its Surface Pro 2. Sure, this would have led to a moderate reduction in performance, but as investors have seen in the Sony Vaio Tap 11 (which uses a 6W "Haswell" processor instead of the 15W variant), this can lead to a much thinner and lighter device than what Microsoft has developed with the Surface Pro 2.

Surface 2 uses the wrong operating system
While the Surface Pro 2 tries to fulfill Microsoft's vision of a tablet/PC hybrid (albeit sub-optimally), the Surface 2 has no idea what it's trying to be. On one hand, Microsoft is clearly trying to push it as a convertible productivity device. However, the major reason that businesses and consumers alike have generally insisted on having Windows as their primary computing devices is that there is a gigantic legacy software base that can only work on Windows and X86 processors.

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What Microsoft should be doing is promoting a device that can do both – a traditional PC and Modern UI that isn't $900+ or a battery-killing, bulky device. By trying to force a Modern UI-only device down users' throats, many will simply either buy a non-Surface Windows 8.1 device or just buy an iPad or an Android device. After all, didn't Microsoft take a $900 million inventory writedown on the original Surface RT, precisely because these devices didn't sell?

What's with these simple mistakes?
Microsoft generates a significant amount of free cash flow year in and year out. It has a great brand, a wonderful ecosystem of partners, and businesses that diversify far outside of Windows, so this Surface debacle isn't going to make or break the company. Nevertheless, it's frustrating to see these simple, easily avoidable mistakes happen with Microsoft's Surface product line (although this Fool still believes Microsoft shouldn't even be doing its own tablets).

Eventually, Microsoft will get it right, but it doesn't look like the Surface 2 or the Surface Pro 2 did the trick. The path is all clear for Apple's Oct. 22 iPad launches, which will likely be much more impressive than the Surface refreshes. Oh, and there's probably going to be a new Google Nexus 10 soon, too. 

Ashraf Eassa owns shares of Intel. The Motley Fool recommends Apple, Google, and Intel. The Motley Fool owns shares of Apple, Google, Intel, and Microsoft. We Fools may not 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.

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