Microsoft is expected to report strong sales for its Surface Pro 3 and the momentum could continue courtesy of business customers.
When Microsoft launched its first Surface two years ago, the device was aimed at consumers and positioned as a bring your own device/laptop type play. About 18 months ago, Microsoft began focusing on business sales. With the launch of Surface Pro, the enterprise push was at full throttle. Now it's likely that Surface Pro 3 momentum can be carried by businesses.
This Surface halo effect possibility was evident at a lunch in New York highlighting a retail point of sale partnership between eBay's PayPal and Microsoft. The win-win partnership goes like this. PayPal launches a software developer kit for its Here app and gets favored access to Microsoft's ecosystem. Microsoft can use PayPal to enable a strong point of sale entry for small businesses.
What's the big deal? Small businesses are more likely to create a halo effect for Surface Pro relative to large enterprises. Sure, customers such as Coca Cola, BMW and Lufthansa are nice wins for the Surface, but to see the device in the wild you would need to be delivering soda, selling cars or hanging out in an airline cockpit.
SMBs can give Microsoft's Surface more exposure to offset the MacBook Air and iPad crowds in Starbucks. Consider the following:
Amy Berend, owner of Bridal Boutique, a Lewisville, Texas bridal store, is piloting a Surface, PayPal and iConnectPOS combination to move dress buyers around her 9,000 square foot store and reduce checkout friction.
A mobile point of sale approach allows Berend to close sales before brides have to sign paperwork about not returning a dress and other issues. Berend noted that 5 to 10 brides a month change their minds about a dress between the time they select one and actually sign the paperwork.
The PayPal-Surface combination makes the sale mobile so Berend can get paperwork sign off and credit card data as a dress choice is made.
Customers like the Surface approach and tell friends because it improves service.
Before you know it you have a bunch of chatty brides advocating a Microsoft device.
Carry the SMB push out and Microsoft and its channel partners such as CDW could get some leverage.
Panos Panay, corporate vice president for Surface Computing at Microsoft, was nearing the giddy mark listening to Berend talk about the pilot. SMBs and partnerships like the one with PayPal "are huge for us," said Panay. He argued that potential customers are starting to get the appeal of the hybrid PC-tablet device. To Panay, the vision behind Surface may best be illustrated by SMBs.
"SMBs have adaptability and show off Surface," said Panay, who added that the technology and business cases scale to large enterprises.
Panay acknowledged that it takes a while for customers to get the argument that Surface plays tablet and PC roles. "It's a tablet but also a PC," said Panay, who is clearly gunning for iPad replacements in businesses. "That 'but' is a big deal."
In any case, analysts are optimistic about Surface Pro 3 sales. Brendan Barnicle, an analyst at Pacific Crest, is expecting Surface Pro 3 to contribute more than $1.1 billion in revenue in Microsoft's fiscal second quarter. He's expecting Microsoft's computer and gaming hardware unit to deliver December quarter sales of $3.85 billion.
Barnicle said in a late December research note:
Over the past week we spoke with more than 50 retailers across the United States. They reported surprisingly strong sales of Surface Pro 3. It is increasingly viewed as a laptop replacement for business users and students. Inventory levels are lean, with most retailers averaging six to eight days of sales on hand. Channel partners expect that Surface Pro 3 strength can continue into the new year as enterprise clients are showing more interest in the product.