MENU

Should Microsoft kill the surface?

When Microsoft  (NASDAQ: MSFT )  unveiled its latest Surface 2 and Surface Pro 2 tablets, it really tried its best to bring an Apple-like flair to the launch event. It’s clear that Microsoft is serious about its Surface products. Contrary to the notion that these products are merely “reference designs” for Microsoft’s many OEM partners to work from, it wants them to succeed in the marketplace. While Microsoft’s Surface efforts are good, it looks as though the devices coming from Microsoft’s longtime hardware partners are even better.

Dell’s Venue lineup looks great

Dell launched a flurry of both Windows 8.1 and Android tablets and convertibles at its Oct. 2 event. In particular, the company’s Venue 8 Pro and Venue 11 Pro look to be even more attractive than Microsoft’s own offerings. For starters, both of the Dell devices feature the full version of Windows 8.1 and not the scaled-down Windows RT that can’t run legacy applications or work with many legacy peripherals. This means that users — particularly those interested in the 11 Pro — can run all of their standard desktop applications while at the same time running the latest touch-enabled “Modern UI.” Only Microsoft’s bulky and expensive Surface Pro 2 can claim this functionality — but at nearly twice the price.

Further, there is a clear trend toward smaller tablets (7-8 inches seems to be the sweet spot for pure tablets). These are attractive due to both their relatively low price points as well as their ease of use. Dell’s launch of an 8-inch, US$299 tablet that comes with an Intel (NASDAQ: INTC)  quad core Atom, full Windows 8.1, and a copy of Office Home & Student really seems to hit exactly what customers are likely to want from a pure tablet. While there’s little doubt that Microsoft will roll out its own 8-inch device, it will likely again come packed with Windows RT (not full Windows 8.1), which could damage the value proposition.

Should Microsoft just kill the Surface?

It looks as though Dell has done a great job. If marketed correctly, the new products should help drive share for Dell, Intel’s tablet processors, and Microsoft’s Windows 8.1 OS. However, seeing Dell execute so well on these devices seriously calls into question the need and the viability of Microsoft’s strategy. If Dell can make truly quality devices, then other equally experienced PC vendors such as ASUS, HP, and Lenovo are sure to be out with their own highly compelling devices. And, as companies used to the low-margin, cutthroat commodity hardware game, they will be much more likely to thrive than Microsoft will.

The problem here is that Microsoft likely sees Apple’s hardware margins, and instead of being content with software license revenue and the cut that it will receive when users buy Windows Store applications, it now wants to play the hardware game. Should Microsoft’s hardware partners all up and leave for Android, then aggressively building and selling its own hardware would be a last resort. But with more-than-competent hardware partners offering excellent designs, on the other hand, it just seems like a pointless exercise.

The Foolish bottom line

Does this make Microsoft a bad investment? No. Its hardware partners are likely to sell a bunch of these gorgeous Windows 8.1 tablet designs. But would it be better if Microsoft were to focus its energies solely on marketing devices from its partners and to position itself as the “mother” of the Windows ecosystem? You bet.

The Australian Financial Review says “good quality Australian shares that have a long history of paying dividends are a real alternative to a term deposit.” Get 3 Stocks for the Great Dividend Boom in our special FREE report. Click here now to find out the names, stock symbols, and full research for our three favourite income ideas, all completely free!

More reading

A version of this article, written by Ashraf Eassa, originally appeared on fool.com.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.