Microsoft (MSFT 2.51%) has remained committed to the Surface line despite having to take a $900 million writedown because of unsold inventory on the hybrid tablet/laptop's original model.
Despite that initial failure, the company has doggedly pursued its vision, releasing multiple version of the device -- some running the full version of Windows, and others running Windows RT, a tablet-only OS that only runs apps designed specifically for it. That effort began to pay off in recent months as the company has had some success with its high-end Surface Pro 3.
That model, designed as a laptop replacement, has a base price of $799 (which does not include the Surface's trademark keyboard cover). Microsoft clearly positioned it in commercials as an alternative to Apple's (AAPL 1.45%) MacBook Air.
Sales for the Pro 3 have been encouraging, and Microsoft reported "Surface revenue of $1.1 billion, up 24%, driven by Surface Pro 3 and accessories" for its second quarter of 2015, which includes the pivotal holiday sales period. That's good news that bodes well for the future of the line, but Surface Pro 3 is an expensive, high-end device not priced to compete with iPads and top-of-the-line Android tablets.
To do just that, Microsoft has announced the Surface 3, a version of the laptop/tablet hybrid with a $499 base price aimed at a wider consumer audience. The Surface 3 looks like a smaller version of the Pro 3 with the same materials and design. It's 8.7mm thick, weighs 1.37 pounds and has a 10.8-inch screen.
It's a compelling device that offers a few surprises.
Source: Microsoft.
It runs real Windows
Since its launch, the Surface line consisted of more expensive devices that ran full Windows and cheaper (but still not cheap) models that ran RT. The new Surface 3 will offer a full version of Windows 8.1, and it will be upgradable to Windows 10 when the new OS is released.
That's an important concession by Microsoft, because RT never really caught on, and it had a limited number of available apps. Allowing the entry-level Surface to run full Windows opens up all of the software that runs on PCs and laptops to the device. And, once Windows 10 launches, it will have an app store where the apps work across all Windows devices, including tablets and phones.
Windows RT was a major reason to not buy a Surface, and Microsoft has removed that point of consumer friction.
It comes with a pen
Most tablet makers have shied away from pens and styluses, but Microsoft is bucking that trend by offering a pen as a Surface 3 accessory (as it has with the Pro 3). The pen will be sold separately, and it won't be stored on the device the way many styluses are.
"It has been really awesome to see how our customers have embraced the pen for things like taking notes, marking up files for reference and collaboration, and creating amazing digital art," wrote Panos Panay, head of Microsoft's Surface team in a blog post. "Surface 3 supports the same pen experience as Surface Pro 3, including 256 levels of pressure sensitivity for accuracy and detail."
The Surface 3 pen. Source: Microsoft.
It drops the proprietary charging port
One frustration with the earlier Surface models (I own the original RT version) was that it used a non-standard charging connection that could be tough to line up, The 3 eliminates that and replaces it with a standard Micro USB charger, which, as the company pointed out in its blog post, is the same charger used on most (non-Apple) phones.
"The included 13W charger will be the fastest charging option, but if your battery is running low, you'll be able to use your phone charger as well," wrote Panay.
Its processor is designed for a tablet
The earlier RT Surfaces ran on Nvidia processors, which were designed for smartphones. Surface 3 is powered by Intel's Quad-core Intel Atom x7 processor, "the highest performing Atom processor on the market," according to Panay.
The processor "features a unique combination of burst mode and advanced power management -- meaning it delivers performance when a given task requires it, but scales back to conserve power whenever possible," he wrote.
The Atom x7 does not require a fan for cooling, which allows the device to be thinner and quieter. Most importantly, the processor has enough power to run the full version of Windows, but Panay laid out its limitations.
"If you do very demanding work -- things like editing and rendering video or complex 3D modelling -- then the power and performance of a Surface Pro 3 is for you," he wrote. "If the majority of your work is less intense – working in Office, writing, using the Internet (using IE, Chrome, or Firefox), and casual games and entertainment, then you'll find that Surface 3 delivers everything you need."
This device makes sense
Surface 3 fills a niche for Microsoft. It's priced comparably to iPad, but it's arguably a more useful device, as it's designed to work as a laptop -- Apple's tablet is not.
Microsoft has the high-end tablet/laptop with the Pro 3, and it has the low-end tablet market well served with sub-$200 and even sub-$100 devices from its OEM partners. The Surface 3 gives the company a complete line, all of which runs on Windows.
It's a sensible strategy that gives consumers options no matter their price point.
