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Surface survives Microsoft cuts, but tablet strategy remains muddled

Gregg Keizer | July 18, 2014
What part, if any, will Nokia have in tablets, analysts ask.

Two configurations of the Surface Pro 3 went on sale Friday, at prices of $999 and $1,299 sans cover keyboard. (Image: Microsoft.)

Despite Elop's statement that, "We will continue our efforts to bring iconic tablets to market," Microsoft's tablet strategy remains unclear, analysts said.

"I'm still confused about the role devices will play, especially in emerging markets," said Carolina Milanesi, chief of research and head of U.S. business for Kantar WorldPanel Comtech. "We still don't have much clarity on the role of Nokia on the tablet side."

In his email, Elop hinted that Microsoft's smartphone strategy would be to aggressively push into price-sensitive markets to boost the user base and gain market share.

"Is Microsoft hoping that people who buy [low-priced Windows Phones] will at some point buy a PC?" asked Milanesi. That strategy, she added, was risky, as large numbers were unlikely to "graduate" to a PC, or even a tablet running Windows.

The Surface has always been positioned as a premium brand, with premium prices. Will Nokia's role then be to flesh out Microsoft-designed devices on the low end, to "go cheaper and wider," as Milanesi put it?

She wasn't sure, and blamed Microsoft. "I was really hoping to see more concrete steps Microsoft will take in tablets," Milanesi said. "Either Microsoft hasn't explained it, or it hasn't figured this out."

Moorhead and Miller were on Milanesi's side.

"Microsoft was clear that it wanted to complement OEMs versus competing with them, but they gave no details on how they would do that, nor did they give new insight into the demarcation between Surface and Nokia," Moorhead said. "I expect that in the coming months, though."

"It's been a long time since I've heard '2520' uttered by anyone from Microsoft," said Miller, referring to the Lumia 2520, a tablet that runs Windows RT 8.1 launched by Nokia in October 2013. "The role of the 2520 in particular is curious. It's also duplicitous. I wasn't a fan of the original Surface, but I really liked the Lumia 2520. But has Microsoft learned what makes it a better device than the Surface? I don't know. As Microsoft moves forward, using either 'Surface' or a number to brand their devices, the hope I've had is [to know] what Microsoft has gleaned from that hardware."

Miller was pessimistic that a lower-price tablet strategy for emerging markets would work out for Microsoft. "Those markets are so price sensitive. They don't just evolve where people start to save more to go buy a tablet. And they're not loyal to a platform. They tend to buy whatever is cheapest, and good enough, at that moment."

Nor are those kinds of customers a big pool of untapped revenue, Miller argued. "They don't invest in the soft-goods market, they're not investing in apps that aren't free, they're not investing in music," Miller said. "They're not a net gain for the Microsoft ecosystem."

 

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