Microsoft's Surface Has Been A Failure, But There's No Way It Can Kill It Now

Satya Nadella Microsoft


In a few hours, Microsoft is holding an event for the Surface, its tablet computer.

While many people were expecting Microsoft to release a smaller screened Surface, the latest report says Microsoft is going the other way. It will reportedly release a bigger screened Surface. The new Surface is going to get a 12-inch screen, up from its current 11-inch screen.

This would be pretty emblematic of Microsoft and its Surface program. From day one it's been zagging where everyone else is zigging.
Since Apple defined the modern tablet with the iPad in 2010, just about everyone else has been copying the iPad.

But not Microsoft. It released a tablet that runs in a tablet mode and a full desktop mode. Microsoft emphasizes getting work done with the Surface, and it pushes consumers to buy a case with a keyboard built in for the Surface. Apple emphasizes getting things done, but in a way that relies on the touch screen of the tablet.

And just before Microsoft released the Surface, Apple started selling the iPad Mini, which critics call the "real iPad," because it's more portable, and better for light web surfing, gaming, reading, and checking Facebook/Twitter.

Microsoft whiffed on the benefits of a smaller tablet. It went with an 11-inch form factor, and now it's supposedly going even bigger. (By the way, it makes sense for Microsoft to go towards a bigger screen. The Surface seems to be doing best with enterprise customers who use it has a hybrid tablet/laptop. Those people probably appreciate a bigger screen.)

In some ways, this is admirable. Instead of just following Apple like everyone else, it's trying to blaze its own trail. In other ways, it's not so admirable. Microsoft's tablet business has generated $2.64 billion in sales since October of 2012, according to the Wall Street Journal. By comparison, Apple did $7.6 billion in sales during the March quarter alone. And it was a bad quarter for Apple's iPad business. The Surface business is estimated to have lost $2 billion thus far.

As a result, lots of people wonder what Microsoft is doing. Why is it even bothering to make the Surface? Shouldn't it just kill the Surface?

The easy answer is yes, Microsoft should just axe its money losing Surface business. But the correct answer is that it should continue to invest in Surface despite its early troubles.

Microsoft's Windows business is seriously threatened right now. The rise of Apple's mobile software, iOS, Google's mobile software, Android, and Google's lightweight desktop OS, Chrome, have all diminished Windows. At one point, Windows was running 90% of personal computing devices. Today it's around 20%.

If Microsoft doesn't make the Surface tablet, there's a chance no one will make Windows tablets. Why would Samsung, which has had massive success with Android even waste its time with Windows? Why would HTC, or Lenovo, or any other company put significant resources towards Windows for tablets?

The tablet market may have hit a wall recently, but it's hard to argue that it's not the future of computing. In five years, desktop and laptop computers will look more like tablets, not less. Microsoft can't afford to sit on the sidelines and hope that its traditional PC partners are going to make great tablets.

Microsoft has to make the Surface, no matter how much it costs.