Editorial: Why Microsoft Surface isn't growing after seven years of trying

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  • Reply 61 of 86
    Dan_DilgerDan_Dilger Posts: 1,583member
    ctt_zh said:
    The Surface product line is doing just fine. 

    Microsoft Surface Quarterly revenue gains / losses since the last revenue decrease in 2017 Q4:

    2020 Q1  -4%

    2019 Q4  +14%
    2019 Q3  +21%
    2019 Q2  +39%
    2019 Q1  +14%

    2018 Q4  +25%
    2018 Q3  +32%
    2018 Q2  +1%
    2018 Q1  +12%

    2017 Q4  -2%

    If the next 2+ quarters are bad then sure a trend is forming... this current decrease is likely a mere blip. The new product lines should ensure decent growth through the next 2 years.
    You listed a series of percentages. A percentage is a ratio of another number. 

    The figures are charted out. They do not stray far from that $1 billion per quarter line do they? 

    It is not doing just fine, because those numbers are revenues, not profits. And ~3 M or so units of a given product are not enough to make designing it cost effective or sustainable. As the Pixel team.

    AppleExposedlolliverwatto_cobra
  • Reply 62 of 86
    As to the “why”: software? 
    AppleExposedwatto_cobra
  • Reply 63 of 86
    The OS isn’t built for touch. Jabbing away at teeny menus with your finger is a poor experience. So people aren’t buying them to use them like iPads. People are buying them to use like laptops, and the overall market for conventional windows computers continues to shrink. 
    lolliverDan_Dilgerwatto_cobra
  • Reply 64 of 86
    Honest question:  Have any of you actually tried Surfaces, for work or otherwise?

    What are you impressions?  What are the distinct pros and cons?
    I've had mine for a while now and have not had any issues but it will all depend on what your intentions for using it are - I don't need any heavy processing so it does the trick. I wouldn't recommend it if high-end photo editing or video editing is part of your job but I also wouldn't recommend the Macbook Air for that either.
    philboogie
  • Reply 65 of 86
    AppleExposedAppleExposed Posts: 1,805unconfirmed, member
    ctt_zh said:
    The Surface product line is doing just fine. 

    Microsoft Surface Quarterly revenue gains / losses since the last revenue decrease in 2017 Q4:

    2020 Q1  -4%

    2019 Q4  +14%
    2019 Q3  +21%
    2019 Q2  +39%
    2019 Q1  +14%

    2018 Q4  +25%
    2018 Q3  +32%
    2018 Q2  +1%
    2018 Q1  +12%

    2017 Q4  -2%

    If the next 2+ quarters are bad then sure a trend is forming... this current decrease is likely a mere blip. The new product lines should ensure decent growth through the next 2 years.

    How many were they selling before increase? When compared to either iPad/Mac those numbers are laughable.
    lolliverdewmewatto_cobra
  • Reply 66 of 86
    Very thoughtful write up by DED. I might add two points. First, Microsoft doesn't need or want to compete too aggressively in the PC hardware market. They pull in $1B from Surface (at low or no profit) but several times that (at a nice profit) by licensing Windows to their OEM partners. So they're disincentivized to push their own hardware at the expense of their partners. Which leads to my second point, which is the strategic role of Surface. It is not to be the largest or most profitable PC vendor. If that was the strategic goal then Satya Nadella would have booted the Surface team by now. He has had no problem trimming the fat in Redmond. Instead, I think Surface provides an avenue for Microsoft to gain some cache, to provide some vision about the future of the platform, drive some interest from consumers, etc. It is more of a "hero" device really. The reality is they'll always be a "boutique" PC maker.
    dewmewatto_cobra
  • Reply 67 of 86
    AppleZuluAppleZulu Posts: 2,067member
    gatorguy said:
    AppleZulu said:
    gatorguy said:
    Note: All of these unit sales comparisons suffer from the same inherent flaw:
    If you want to use the Mac or iOS operating system you have a single source with a very limited selection. Every Apple OS user will be buying from that single source even if distributed via a few retail partners. Every sale of product will be recorded by Apple. Some people will simply accept the feature or form limitations offered thru that small selection of products (relatively speaking) in order to use their preferred OS.

    Obviously the same restrictions don't apply to Microsoft's OS (or Android for that matter). thousands of variations and builds and form factors with only the OS they rely on being the common thread. Product sales will be recognized by who knows how many different OEM's. Don't like the Surface keyboard or memory options or form factor or price? There's options from not-Microsoft companies that might be more pleasing, no need to accept any limitations beyond those flowing from the OS itself. Pick and choose the specific unit from whatever company you think matches best with your wants/needs.

    Otherwise the typical creatively written DED article. I love his way with words, excellent stuff. 
    You write this as though Apple’s “single source” and “limited selections” for hardware is a negative, and that for Microsoft the “thousands of variations and builds and form factors” is a positive.
    Not at all a negative, and I wasn't discussing the pros and cons of a closed platform vs an open one. Read my comment a second time.

    Except that you were discussing the pros and cons of a closed platform vs an open one: "Some people will simply accept the feature or form limitations offered thru that small selection of products (relatively speaking) in order to use their preferred OS," you wrote, referring to the closed platform. I suppose the tone is open to interpretation, but it reads like a criticism or (at best) a backhanded complement to me, anyway. Then you wrote, "There's options from not-Microsoft [hardware vendor] companies that might be more pleasing, no need to accept any limitations beyond those flowing from the OS itself. Pick and choose the specific unit from whatever company you think matches best with your wants/needs," referring to the open platform, in what seems to be a positive tone.  The open/closed platform aspect of the discussion is pretty central to what you wrote, though, even when I read your comment a third time.

    I don't think most people grudgingly purchase Apple devices because it's the only way to get the OS. They buy them because the two things are designed together, and as far as user experience goes, the Apple customer doesn't have to differentiate the two. 
    edited October 2019 lollivertmaywatto_cobra
  • Reply 68 of 86
    I think one issue MS still has is that it is too quick to crank something out and then abandon it just as quickly.  Remember Zune?  Nobody wants to invest in abandonware.
    lolliverDan_Dilgerwatto_cobra
  • Reply 69 of 86
    Honest question:  Have any of you actually tried Surfaces, for work or otherwise?

    What are you impressions?  What are the distinct pros and cons?
    Surface Hub is nothing amazingly worthy of its price tag. Most time, it’s sitting there as white elephants.

    Like Samsung, Surface Hub is just a compilation of some functions and services available on Windows (eg Skype for Business) throw into an unrefined hardware. It does none excellently.
    Dan_Dilgerwatto_cobra
  • Reply 70 of 86
    Dan_DilgerDan_Dilger Posts: 1,583member
    Very thoughtful write up by DED. I might add two points. First, Microsoft doesn't need or want to compete too aggressively in the PC hardware market. They pull in $1B from Surface (at low or no profit) but several times that (at a nice profit) by licensing Windows to their OEM partners. So they're disincentivized to push their own hardware at the expense of their partners. Which leads to my second point, which is the strategic role of Surface. It is not to be the largest or most profitable PC vendor. If that was the strategic goal then Satya Nadella would have booted the Surface team by now. He has had no problem trimming the fat in Redmond. Instead, I think Surface provides an avenue for Microsoft to gain some cache, to provide some vision about the future of the platform, drive some interest from consumers, etc. It is more of a "hero" device really. The reality is they'll always be a "boutique" PC maker.
    I think you are right that Microsoft currently operates Surface as a sort of vanity project, but that’s also largely because it failed right out of the gate. Steve Balmer actually believed that Microsoft could just “walk in” and destroy iPad and take over premium PCs from MacBooks. 

    Nadella inherited the failure, and I think he radically scaled back any notion of Surface being a strategy of impact. It’s used as a way to make Microsoft sound innovative and cutting edge, much like Hololens. No longer really talked about like a near term, commercial product of impact outside of some niche uses. 

    In terms of fearing the risk of upsetting partners with competition, perhaps Surface (and Pixel) are purposely run into the ground to prevent them from being too successful. I find that very hard to swallow tho. I think that’s a sour grapes take putting a nice spin on failure. 

    Apple similarly wants to have vibrant third party 
    ecosystem support, in software and services vs the licensed hardware of Microsoft and Google. 

    Yet it competes directly and intensely with its partners: AppleMusic/Spotify; TV+/Netflix; FinalCutPro/Premier; iApps/Office. In some cases creating public turmoil, such as the current situation with Spotify, or Sidecar, or other accusations of “Sherlock.” 

    Sometimes Apple loses, such as with Aperture. Could you imagine Apple maintaining that app as a flashy, advertised title about Apple’s ‘innovate and well designed apps’ but that was intentionally held back in features just to placate Adobe? yet the App Store and the value of specific partners like adobe are worth far more than the revenues that Apple gets from its first party apps. 

    So if Apple isn’t pulling punches, why are Microsoft and Google? I find it much more convincing that they are just executing poorly and failing to achieve the level of success they expected, and are falling back to (or being excused by) the idea that they weren’t really trying. But spending billions and looking foolish are not examples of “not really trying.”

    Microsoft just embraced AMD and Snapdragon in a snub of Intel. That’s not really a way to cozy up to its existing WinTel PC partners. It’s an attempt to break out and win some high stakes gamble, and shows some willingness to stab partners to win territory. It even embraced Android! That really destroys any notion that Microsoft is operating Surface only as a way to passively promote the wellbeing of its Windows licensees. No, it’s just doing anything it can to find a success for itself. 
    GG1watto_cobra
  • Reply 71 of 86
    crowleycrowley Posts: 10,453member
    We have a few of the wall mounted Surface Hubs at my workplace, they're pretty good.  I'm surprised that Microsooft's revenue is so static, I see a lot of Surface devices around, and generally people seem happy with them.
  • Reply 72 of 86
    crowleycrowley Posts: 10,453member

    It is not doing just fine, because those numbers are revenues, not profits. 
    Since (as you note) Microsoft don't report Surface profits, you're not really in an informed position to make such aclaim. 

    Besides which, what does "fine" even mean in this context?  Microsoft are committed to the line, and Microsoft have a healthy company wide profit margin, it doesn't even matter much if the Surface makes any profit, its existence is more of a vanity project.
    muthuk_vanalingamrogifan_new
  • Reply 73 of 86
    crowley said:

    It is not doing just fine, because those numbers are revenues, not profits. 
    Since (as you note) Microsoft don't report Surface profits, you're not really in an informed position to make such aclaim. 

    Besides which, what does "fine" even mean in this context?  Microsoft are committed to the line, and Microsoft have a healthy company wide profit margin, it doesn't even matter much if the Surface makes any profit, its existence is more of a vanity project.
    Microsoft was once committed to the Zune and to Windows Phone/Mobile, too, and spent billions. Neither exists anymore...
    Soliwatto_cobra
  • Reply 74 of 86
    Totally anecdotal, but at conferences and meetings that I attend, what was once all iPads seems to now be about 2/3rds Surface Pros. The people I know who use them as their primary PCs really like them. None of them are power users and they're all happy on Windows.

    I'm sure that overall iPads are outselling these things by a large margin, but from what I've seen this is a successful product line for Microsoft.

    Me? I love my iPad Pro :)
    No not possible. You’re ruining DEDs narrative. ;)
    bigtds
  • Reply 75 of 86
    crowley said:

    It is not doing just fine, because those numbers are revenues, not profits. 
    Since (as you note) Microsoft don't report Surface profits, you're not really in an informed position to make such aclaim. 

    Besides which, what does "fine" even mean in this context?  Microsoft are committed to the line, and Microsoft have a healthy company wide profit margin, it doesn't even matter much if the Surface makes any profit, its existence is more of a vanity project.
    Microsoft was once committed to the Zune and to Windows Phone/Mobile, too, and spent billions. Neither exists anymore...
    You might be right about the new folding devices they announced ( that aren’t shipping until fall 2020) but the more conventional laptops? I think Microsoft will continue to make them.  Surface doesn’t have to be a big, profitable business. Microsoft isn’t a hardware company. This is just a little side business that keeps tech sites like The Verge writing about them.
  • Reply 76 of 86
    crowleycrowley Posts: 10,453member
    crowley said:

    It is not doing just fine, because those numbers are revenues, not profits. 
    Since (as you note) Microsoft don't report Surface profits, you're not really in an informed position to make such aclaim. 

    Besides which, what does "fine" even mean in this context?  Microsoft are committed to the line, and Microsoft have a healthy company wide profit margin, it doesn't even matter much if the Surface makes any profit, its existence is more of a vanity project.
    Microsoft was once committed to the Zune and to Windows Phone/Mobile, too, and spent billions. Neither exists anymore...
    I suppose that's true, but Microsoft has become a very different company since the Ballmer days.

    I wonder if there's a Microsoft Insider forum equivalent where a certain set of crusties say "Never would have happened under Steve".
  • Reply 77 of 86
    Very thoughtful write up by DED. I might add two points. First, Microsoft doesn't need or want to compete too aggressively in the PC hardware market. They pull in $1B from Surface (at low or no profit) but several times that (at a nice profit) by licensing Windows to their OEM partners. So they're disincentivized to push their own hardware at the expense of their partners. Which leads to my second point, which is the strategic role of Surface. It is not to be the largest or most profitable PC vendor. If that was the strategic goal then Satya Nadella would have booted the Surface team by now. He has had no problem trimming the fat in Redmond. Instead, I think Surface provides an avenue for Microsoft to gain some cache, to provide some vision about the future of the platform, drive some interest from consumers, etc. It is more of a "hero" device really. The reality is they'll always be a "boutique" PC maker.
    I think you are right that Microsoft currently operates Surface as a sort of vanity project, but that’s also largely because it failed right out of the gate. Steve Balmer actually believed that Microsoft could just “walk in” and destroy iPad and take over premium PCs from MacBooks. 

    Nadella inherited the failure, and I think he radically scaled back any notion of Surface being a strategy of impact. It’s used as a way to make Microsoft sound innovative and cutting edge, much like Hololens. No longer really talked about like a near term, commercial product of impact outside of some niche uses. 

    In terms of fearing the risk of upsetting partners with competition, perhaps Surface (and Pixel) are purposely run into the ground to prevent them from being too successful. I find that very hard to swallow tho. I think that’s a sour grapes take putting a nice spin on failure. 

    Apple similarly wants to have vibrant third party 
    ecosystem support, in software and services vs the licensed hardware of Microsoft and Google. 

    Yet it competes directly and intensely with its partners: AppleMusic/Spotify; TV+/Netflix; FinalCutPro/Premier; iApps/Office. In some cases creating public turmoil, such as the current situation with Spotify, or Sidecar, or other accusations of “Sherlock.” 

    Sometimes Apple loses, such as with Aperture. Could you imagine Apple maintaining that app as a flashy, advertised title about Apple’s ‘innovate and well designed apps’ but that was intentionally held back in features just to placate Adobe? yet the App Store and the value of specific partners like adobe are worth far more than the revenues that Apple gets from its first party apps. 

    So if Apple isn’t pulling punches, why are Microsoft and Google? I find it much more convincing that they are just executing poorly and failing to achieve the level of success they expected, and are falling back to (or being excused by) the idea that they weren’t really trying. But spending billions and looking foolish are not examples of “not really trying.”

    Microsoft just embraced AMD and Snapdragon in a snub of Intel. That’s not really a way to cozy up to its existing WinTel PC partners. It’s an attempt to break out and win some high stakes gamble, and shows some willingness to stab partners to win territory. It even embraced Android! That really destroys any notion that Microsoft is operating Surface only as a way to passively promote the wellbeing of its Windows licensees. No, it’s just doing anything it can to find a success for itself. 
    I appreciate the thoughtful reply. Just a few additional comments:
    • Yes, Ballmer was originally naively bullish about Surface. But he was bullish and blustery about everything. His mantra in the waning days of his tenure as CEO was that Microsoft was going to be a "devices and services" company. Satya Nadella had a very different view of things and as soon as he took over he dismissed the "devices and services" idea, and began talking about mobile-first, cloud-first, productivity. He released Office for iPad (which Ballmer had been holding back) and cancelled the Surface Mini at the last minute. But he has not only kept, but expanded the Surface line over the last few years, which again suggests that Surface is succeeding in whatever capacity they need it to (thought leadership, platform expansion via new device types, vanity, etc.).
    • More generally, I think you (and DED) are falling into the trap of comparing two very different companies, that have different strategies and operate under a different set of constraints. Apple is operating in a closed environment that it controls. They made their money by offering a premium end-to-end experience, with the vast majority of the revenue attributed to hardware (though it was made more attractive by its unique, integrated software). Microsoft is operating in an open environment, where they make the OS but made all of their money by licensing that software to partners, effectively commoditizing the hardware business (which is why profits are slim and prices on average are much lower than for Macs). Android's open platform similarly led to commoditized hardware and low prices. In Google's case they monetized through a services layer on top of the OS. But for both Windows and Android, there is a small sliver of premium hardware. For the largest OEMs like Samsung, Lenovo, Dell, etc. their volume helps offset the costs to develop and build that premium hardware. It is all just a completely business environment.  
    • With regards to Apple competing for services, they see this as a key component of their future (just as Microsoft does). Both companies have been beating the "services" drum for a few years now. And both of them have substantial room to capture increasing revenues in an expanding services universe. Hardware, however, has limited room for growth. And PC hardware is a business with razor-thin margins. So there is little to be gained for Microsoft in trying to scale up a hardware business; especially when they can achieve their strategic goals as-is and fund the Surface business with their Office, Windows and Azure profits.
    • Apple is also in a position to throw its weight around since it controls access to a large and highly profitable user base. Microsoft does not; it has nowhere near the influence it did twenty five years ago when Windows was computing, before the internet boom and the mobile boom. It is now very much in "partnering" mode. 
    • Microsoft and Intel have long had a contentious relationship, and MS and PC makers have a vested interest in having AMD and Qualcomm be active participants in the PC space. No one wants to be too reliant on Intel, including Apple. Microsoft is pushing forward with Qualcomm because it wants to progress Windows on ARM, which they hope will keep Windows relevant and open it up to more types of devices. As the OS maker, they are in a better position to try out these new things and open up space for OEMs to fill in with their own products. 
    • Embracing Android is part of Microsoft's goal to bring their services to wherever users are. Similarly, their OEM partners are creating Chromebooks as a hedge against Windows decline. This is just the reality of the current marketplace. 
    Look, I'm not going to argue that Surface should be heralded as a case study in how to succeed in the computer hardware space. I'm just pointing out that there's more to consider than the sales numbers, and that considerations of strategy and historical context will provide a fuller picture. 
    bigtdsmuthuk_vanalingam
  • Reply 78 of 86
    philboogiephilboogie Posts: 7,675member
    mcdave said:
    I think the Surface line’s ‘slow’ growth is due to a few factors;

    1) The article compares the current slow-quarter with the peak-quarter 5 years ago. A peak to peak comparison shows $900m to $1,800m.  Have Mac sales doubled on that time?

    One can cherry pick the absolute best and worst numbers, but the article makes it pretty clear that A) Surface has only briefly moved from $1B quarters over the last 7 years of trying (black line on the chart) B) iPad has peaked very high but remains pretty reliably around $4-5 B C) Mac has also peaked but remains right around $6B D) Other is moving beyond computing and yes, it is growing dramatically faster than Surface, and from a starting point twice as high.



    2) Surface Books are aimed at the premium notebook market which is small with many established competitors (including Apple) and unlikely to show runaway growth.

    3) Surface tablets are a travesty to Windows users hence ‘real PC’.  Neither Windows nor its fanbase ever embraced touch.  Beyond a bit of scrolling,  compromised buttons and some pen input, there are no touch-first controls.  They were only going to sell to those who thought they could hit two birds with one stone only to realise they missed both.

    The real question is; what aid Apple going to do with the Mac to catch Surface’s limited growth?  Mac Pro and $2.5K notebooks won’t do it.

    You‘re asking for Apple’s $6B Mac business to grow as fast „as a percentage“ as Surface grew from zero, but really, Microsoft and Apple have the same market opportunities available to them. Microsoft devoted its efforts to building impractical design-heavy, poorly considered x86 PCs. Apple did make Macs better, but it created a new platform for mobile computing, and then entered wearables and other new markets to achieve growth. Microsoft didn‘t think to do that, so its results over the past decade have not been impressive.

    Stock-wise they do very good:



    https://www.netcials.com/stock-10-year-history/MSFT-Microsoft-Corporation/ ;
    avon b7Soli
  • Reply 79 of 86
    melgrossmelgross Posts: 33,565member
    crowley said:

    It is not doing just fine, because those numbers are revenues, not profits. 
    Since (as you note) Microsoft don't report Surface profits, you're not really in an informed position to make such aclaim. 

    Besides which, what does "fine" even mean in this context?  Microsoft are committed to the line, and Microsoft have a healthy company wide profit margin, it doesn't even matter much if the Surface makes any profit, its existence is more of a vanity project.
    Financial people who do follow this have been skeptical about the profitability of the unit since the beginning, when, at first, they did report sales, profits or losses, and units sold. They know about how much Microsoft spends on advertising the products, and about how much warranty costs are, which have been very high as the Surface Pro tablets for several generations have been very unreliable. Manufacturing costs can be estimated as well. It’s not that difficult to access. It doesn’t have to be perfectly accurate, just close.

    its not a vanity project. For a couple of years, at least, hardware was in the company description. They have been very serious about this. It’s just that they overestimated the interest in the products. For the Windows market, these are just too expensive. And for the price, they are clumsy, because of their small size.
    watto_cobra
  • Reply 80 of 86
    melgrossmelgross Posts: 33,565member

    Totally anecdotal, but at conferences and meetings that I attend, what was once all iPads seems to now be about 2/3rds Surface Pros. The people I know who use them as their primary PCs really like them. None of them are power users and they're all happy on Windows.

    I'm sure that overall iPads are outselling these things by a large margin, but from what I've seen this is a successful product line for Microsoft.

    Me? I love my iPad Pro :)
    No not possible. You’re ruining DEDs narrative. ;)
    Because it’s not really true. That is, neither DED’s, or Apple badger. When I go to conferences, I see a mix of Apple laptops, iPads, Windows laptops, and some Surface Pro models. Depending on the conference, the ratios change. But normally, Apple’s products are at least 50%.
    watto_cobra
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