The Surface Pro 3 holds promise, if Microsoft can fix the issues plaguing the device. Credit: Microsoft.
Just when Microsoft (MSFT 0.02%) looked to gain footing with its new Surface Pro 3 convertible tablet -- the first capable of replacing your laptop, Mr. Softy says -- ZDNet's Ed Bott has confirmed a problem connecting the device to high-speed wireless networks.
From what I can tell, an update to the underlying system software and firmware (i.e., code that lives and executes directly in silicon) introduced new errors to the Surface Pro 3 while fixing others. Click here to read Bott's full report.
For investors, the news comes at a bad time. Microsoft is trying to win premium customers to the Surface Pro 3 after spending most of the past two years pitching from the bargain bin:
| Metric | Q1 Fiscal 2014 | Q2 Fiscal 2014 | Q3 Fiscal 2014 |
|
Surface Revenue |
$400 million |
$893 million |
$494 million |
|
Surface Cost of Revenue |
$645 million |
$932 million |
$539 million |
|
Device Gross Margin |
(61.25%) |
(4.37%) |
(9.11%) |
Sources: SEC filings.
Yet this is also par for the course. Microsoft has spent years selling the Xbox console at a loss to gain a foothold in gaming. Then, last year, Mr. Softy pitched the Xbox One has a higher-priced alternative in hopes of winning more deep-pocketed customers. Too many went on to buy Sony's PS4, forcing Microsoft to cut prices.
Surface Pro 3 could suffer the same fate. Microsoft knows it, too, and is already offering $650 in trade-in value to anyone handing over a MacBook Air. Still, drawing such a direct comparison to Apple's sleek laptop creates risk, especially if the Surface Pro 3 fails to deliver a premium experience. That's why what looks like an otherwise small Wi-Fi bug matters so much.
What to do next? If you're a current or prospective Microsoft investor, hang tight and stay tuned here for more reporting on the error and Surface Pro 3 sales. My guess is we'll see a slowdown in the short term as the bugs get worked out. But I also like the potential -- not only for the Surface Pro 3 but also for similar convertibles as users shift computing tasks to lightweight devices.
Now it's your turn to weigh in. Do you own the new Surface Pro 3? Have you experienced the Wi-Fi issues ZDNet describes? Leave your take in the box below.
