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Editorial: Why Microsoft Surface isn't growing after seven years of tryingcorrections said:ObjectiveTechFan said: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.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 partyecosystem 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.
- 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.
Hands on: Using the iPhone as a webcam with iOS 16 and macOS Ventura