Microsoft plans to add to Surface line-up with more models, better distribution

Microsoft plans to add to Surface line-up with more models, better distribution

Summary: Microsoft is pressing ahead with plans to expand its line-up of Surface tablets, and is hoping OEMs will help it freslh out Windows 8 range of touch devices.


Microsoft is planning to expand its Surface line-up on several fronts: more models, wider availability, a broader range and ramped-up production. 

"We are going to expand geographically. We are going to expand the product line-up. We are going to expand retail distribution and capacity. So we look forward to continuing the growth of that business," chief financial officer Peter Klein said on Microsoft's Q2 earnings call on Thursday, according to a transcript by Seeking Alpha.

Despite rumours that Microsoft had slashed production of its Surface RT tablet, Klein said that it could not "in some cases" deliver the devices. 

"We saw some really great demand for some of the touch devices that we brought to market. In some cases, we didn't have the supply that we needed to satisfy that demand," he said.

Analysts have estimated Microsoft has sold around one million Surface RTs in the quarter, which may be nudged up in the coming quarter after it expands distribution to 13 new countries across Europe from February 14.

Klein reiterated several times that Surface sales were one of the top three components of its 11-percent total revenue growth, along with Windows retail upgrades and multi-year enterprise licensing deals.

But Microsoft's own tablet efforts make it just one character in a cast of Windows 8 OEMs that the company is using to flesh out its range of touch devices across different form factors and price points.

"From a price point, we learned what we have always suspected, which is this segmentation and differentiation. One of the powers in the Windows ecosystem, obviously, is the variety of devices and form factors and experiences at a variety of price points. We learned that that continues to be important," Klein said. 

Klein added that Microsoft was "working closely" with OEMs to ensure they bring the "right set of touch devices at the right price point depending on the unique needs of the individual", however those efforts may not be playing out as smoothly as hoped. 

As it stands, OEMs have only been able to hit the pricey end of the spectrum, and have reportedly failed, in Microsoft's view, to build enough touch-based systems, which now threatens to stifle efforts to ramp-up a rich ecosystem of form factors and price points.

Topics: Tablets, Microsoft, Mobility, Microsoft Surface

Liam Tung

About Liam Tung

Liam Tung is an Australian business technology journalist living a few too many Swedish miles north of Stockholm for his liking. He gained a bachelors degree in economics and arts (cultural studies) at Sydney's Macquarie University, but hacked (without Norse or malicious code for that matter) his way into a career as an enterprise tech, security and telecommunications journalist with ZDNet Australia. These days Liam is a full time freelance technology journalist who writes for several publications.

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  • More Surface model

    This is very good news, I really want Surface RT with 7-8" screen, I already have Surface RT, and this is great device, I very like it, but IHMO is little to big --for pure 'consumer' usage.
    • It doesn't look like prices will be coming down...

      In spite of what critics say, I don't think Microsoft needs to or intends to lower the price of the Surface tablets (except that smaller versions may have a smaller price). I think Microsoft wants to maintain the Surface as a "premium" device... and I think that's a good idea. This leaves room for its OEMs to compete at all levels of the market--high & low. It also helps the Microsoft, Windows & Surface brands.
      • newyorkcitymale

        I agree with you on every point. Surface, and it's price point, should remain the benchmark for Windows 8/RT tablets, or any device bearing the Surface branding.
        • If Microsoft fails to lower the price on Surface RT

          then they will be run over by lower-end Surface 8-based tablets from their OEMs.

          In addition, Microsoft should release a Windows RT version without Office RT such that their OEMs can better compete with the iPad and 10-inch form factor Android-based tablets. This would also allow their OEMs to offer a competitively-priced 7- to 8-inch form factor tablets.
          Rabid Howler Monkey
        • Yes and no

          I agree that it's smart of them to maintain a premium pricing structure, but I do think they need to make the touch cover a standard part of the package at all levels of Surface. Given their profit margins are around $220, and the cover costs them about $14 to make, added to the fact that the cover is marketed as a defining characteristic of the device, they really should just suck it up and include it in the package. They'll still be picking up close to or more than $200 per unit.
      • Too little...

        I have no issue with the price point. Heck, I spent bunches on Mac laptops in the last year. Where I have an issue is the anemic storage, and perhaps processor, included. 128GB of storage is simply insufficient. If it can be expanded by the end user (I haven't heard one way or the other) then that may be okay. But before I can consider it, I need well more than 128GB max. I'd like them to have the I7 as an option, and much more memory.
        • Mmm

          I agree that for some people, 128GB is not enough, but that's not true for most people. The vast majority of people use far less than that and will rarely, if ever, need more.

          What Surface DOES need, though, is a standard 1080p screen on all models, RT and Pro alike, and it needs the cover to be part of the bundle.

          I expect it won't be too long until you see Surface RT 2 with a Tegra 4 and 1080p screen, however, though the keyboard/cover is very much an open question.
          • Need to break the Surface

            What I am seeing is a product already behind the curve. The Chinese are pushing ahead with tablets with 4k screens! (not 1080p) and before you say it, surface is a tablet and not a laptop. It is also ambiguous in it's purpose. It is unclear to most people what is transferable from their desktop/laptop onto surface. Being ARM based devices and not 32/64 bit it is hard to see what real advantage it has over a Chinese tablet with Android Jellybean 10000ma battery, 4k screen, HDMI, bluetooth, ability to be hooked to a wireless keyboard etc. etc. + half the price. Wait, I know, the surface has a flip stand. Innovation!
      • Theý have a choice to make

        As it stands, the Surface is not reasonably priced against even premium Android tablets (Nexus, Galaxy, Transformer). Or even the iPad, at least considering Apple's status as a premium/luxury brand, versus Microsoft's non-reputation as a hardware vendor, and a fairly sketchy reputation as a consumer brand.

        If you're sold on Windows RT, or the Tablet/Ultrabook of the Surface Pro, that may not matter. Microsoft being successful as a premium tablet vendor ensures Apple-like margins, which would really help them, abd maybe even the Windows transition to mobile.

        But they have a problem if that doesn't happen. Pricing the Surface RT closer to its hardware cousins on Android could really boost its appeal, and there's plenty of margin in there. And RT in general is going up against not just Android and iOS ARM tablets, but Atom tablets running full Windows 8 at similar prices and, if you believe Intel, performance and battery life.

        But here's the problem: Windows RT OEMs. If Microsoft really wants to be Apple, no worries. But if they want Windows RT to have a chance at being regarded as "industry standard" like full Windows, they need the OEMs. So they have to keep Surface RT prices such that Asus or HP or whoever can pay the $95 or so for RT + Office and still compete with Microsoft. But doing that makes it more difficult to compete with Android, iOS, or even Atom + Windows 8 (Office isn't bundled, so the OEM actually pays Microsoft less.

        And keep in mind, Intel has as much of a need to win here as Microsoft. Sure, Android runs fine on x86, but ARM is still ahead. Windows is where Intel has a natural advantage. They see a war against ARM for certain, and Windows 8 vs RT tablets is Intel's chosen battlefield.
    • Better distribution

      ...That won't be hard. The Surface Rt was the worst product introduction I have seen in my life. This product's avaialability is still a disaster.
      • Agreed

        I agree completely. RT is Microsoft's bid to grab a chunk of the post-PC marketplace, so why is it that until just a few weeks ago I could walk into any Best Buy or Microcenter in the country and walk out with and ASUS Vivo Tab 600 (ASUS's RT device) but Surface was nowhere to be found?
        • May you never buy retail again ;-)

          I didn't even bother with a store. Just ordered it from MS and it was delivered on time and I've been really happy with the RT, so much so I've decided I don't need the Pro.

          Same with the online upgrade for a few desktops - $40 and an hour later I had Windows 8 Pro. I appreciate some people would like to try before buying, but if you want a tablet or a light laptop replacement (as long as you're happy with Office and the Windows apps and don't need legacy applications on the RT version), then it's arguably the best at the moment.

          If you order online, then it's certainly available.
          • Paradigm shifts

            There were far too many paradigm shifts and new technologies involved in Surface for me to feel comfortable buying one sight unseen. To give the most obvious example: the touch keyboard. No way I'd buy one without having a chance to type on it. It's just too different from anything I've typed on before. Now, it turns out that it works amazingly well, given the design constraints (no moving parts) but without being able to use one myself, I'd have to take some random reviewer's word for it.

            And quite apart from that, I like Best Buy's 30 day return guarantee. No hassling with mailing the thing back if I don't like it. Just return it to the store and be done with it.
          • Windows 8 media frenzy

            You realise that you can't add media center on the crippled download version right?
      • I "think" the limited release was due to manufacturing problems

        There were reports that the VaporMG production line was having yield issues when they started production of Surface. Combined with how late WindowsRT went RTM, I'm surprised Surface even released during the holiday season.

        Beyond that, you are right that MS needs a much better product roll out and I would add needs to hit the right price points. If the intel atom based tablets reach the same price point as Surface, then it makes Surface a pointless device.
    • Im hoping

      They work on availability. Were I live (Omaha, Nebraska), I can't find a single place that has a surface (I've tried Nebraska furnature mart, Best Buy, Staples, ect.) I can try out to see if I like the OS.

      Though, I'm also hoping they get a 1080p screen on the next line of surface devices; that would be great (personally, i've been spoiled by high res tablets like the Nexus 10).
    • Yes! More models

      I too would love to see a lower priced surface (or equivalent). I played with one at Best Buy the other day and it's impressive but the price point is just too high for me. If they can make a 7" one and knock a couple of hundred off of the price that would be awesome (although I don't know what that would do to the touch/type cover...)
    • It's coming

      There are rumors of a 7" Xbox tablet device. It wouldn't surprise me if MS relegates RT to the 7" range and slashes prices to compete with Android at that level. They might as well throw Win 8 on everything that comes in a larger form factor and cut ARM out of the picture since Intel's new chips will be superior in the next year or two. Heck Atom already edges out ARM in battery life.
      • RE:It's coming

        If that is true than Microsoft have first client :-)
  • Bargain discounts to $100 for Windows will be standard

    10% of the hardware price is not unreasonable.