Is Microsoft's Surface Studio a $300 million business - and does it matter?

The Surface Studio is selling better than expected, according to Digitimes, but it's still very far from being a mass-market product. However, it could have other benefits for both Microsoft and the PC industry...

Microsoft's Surface Studio

Microsoft's Surface Studio offers a new angle on the desktop PC

Image: Microsoft

Microsoft's high-priced Surface Studio may be selling better than expected, if we can believe a recent report from Digitimes. The Taiwanese company - which publishes a Chinese daily newspaper on IT and high-tech supply chains - reports that "Microsoft has ordered 30,000 units to be shipped in the first quarter of 2017, according to Taiwan-based supply chain makers."

Original estimates suggested that only 15,000 units would be shipped this quarter, because the Surface Studio costs so much more than alternative all-in-one PCs. The three models cost $2,999, $3,499 and $4,199.

Assuming the average buyer spends $3,400, the retail value of 30,000 Surface Studios would be $100 million. If Microsoft could sell 100,000 a year, sales would be worth $0.34 billion.

But this would still be a drop in the bucket. The news item says: "Apple ships about 3.5-4 million all-in-one PCs a year and is the second-largest all-in-one PC vendor worldwide behind Lenovo, according to Digitimes Research."

If so, Apple could be shipping around 40 iMacs for every Surface Studio.

We also don't know what sort of people are buying Surface Studios. If Microsoft is lucky, most of them will be the creative types at whom the product is aimed. But Microsoft has around 114,074 staff - that's the official number for June 30, 2016 - and a lot of them could be tempted. Some Surface Studios could even end up on their office desks, at Microsoft's expense.

But it doesn't really matter. The Surface Studio is obviously a high-end product, not one designed for the mass market. If Microsoft aimed for the mainstream, it would be competing with its own partners, and I don't expect the major ones - HP, Dell, Lenovo, Asus, Acer etc - would like that.

The Surface Studio is doing other things, regardless of how many it sells.

First, it's competing directly against Apple in the image wars, rather than the sales wars. Microsoft never wants to hear anyone say that the best PC for running Windows is a Mac. I think it would enjoy hearing that the best PC for running Windows is a Microsoft Surface, whether or not people actually buy them.

You may remember that the Surface Studio has already scored a major victory in the image wars, because Microsoft's launch generated lots of praise on social media and in the press for its innovation and style. One day later, Apple was widely criticised for its lacklustre MacBook Pro launch, and for failing to even mention its moribund desktop products.

The idea that "Microsoft is the new Apple" is a potent one.

Second, Microsoft's research is feeding innovation into a PC industry that is struggling in a declining market. The Surface Pro range has already prompted several knock-offs, including Apple's iPad Pro. Even if nobody clones the Surface Studio directly, it will give other PC designers new things to think about.

Third, Microsoft's Surface range should help to improve Windows 10. Until recently, Windows software was developed without much first-hand experience of the hardware design problems, whereas Apple benefited from the close integration of hardware and software. We can but hope that the future development of Surface and Windows 10 will produce similar benefits.

Microsoft still makes most of its income by selling through partners, so competing with partners is a dangerous game. However, in this case, there are some benefits. And if the OEMs can see that Microsoft is targeting Apple rather than them, they'll probably live with that.

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