Microsoft Surface is a slow-boiling hit

Believe it or not, Charles Dickens' "A Christmas Story" and the Microsoft Surface tablet have something in common: They're both slow-building hits.

Dickens' "A Christmas Carol," the beloved tale of holiday enlightenment and redemption, was an initial flop. When released in 1843, it immediately sold 6,000 copies. People were thrilled by the tale and the rich format of the stylish book intended to be a gift. The trouble facing Dickens, who essentially self-published the tome, was cost. It was too expensive to produce and he had limited distribution to increase sales. Sound familiar?

Eventually, "A Christmas Story," went on to become one of the bestselling and frequently retold stories of all literature through a combination of perseverance, model improvements and broader distribution channels.

Microsoft, you could say, is experiencing a bit of Dickensian holiday magic with its Surface 2 (RT version) and Surface 2 Pro tablets. The two devices have essentially sold out, at least that what it appears. Microsoft won't comment on sales numbers, but its own website and its limited number of retail and channel partners say they're back ordering tablets and accessories.

Released in October, Microsoft put high hopes on the improved versions of its tablets plus improvements to the Windows 8 operating system (version 8.1) would finally woo would-be tablet buyers to its ranks and start to steal share away from market leaders Apple and Google.

Hope is the best way to describe Microsoft's aspirations, as the initial crop of Surface tablets were a complete flop. Best estimates place sales of the first generation Microsoft tablets at 1.2 million. In June, Microsoft had to write off $900m in unsold Surface RT tablets and accessories. By most estimations, analysts and observers had written off the Microsoft tablet experiment as the Edsel of the mobile device era.

Two factors held back Microsoft's Surface: price and distribution.

Surfaces, particularly the good models, aren't cheap. The magnetic keyboard cover and other accessories add to the costs. To get a unit worthy of laptop replacement, the cost could easily exceed $1,000. Apple iPads are as much as half that cost, although they, too, creep up in price. The sea of Android-based tablets range in price from under $100 to $600.

The larger problems, channel critics agree, is Microsoft's limited and still-confusing reseller strategy. Initially, Microsoft only sold Surface direct - extremely uncharacteristic for this channel-centric vendor. Only when the launch sales floundered did Microsoft open distribution to retailers Best Buy and Staples. In June, Microsoft extended Surface to direct market reseller partners such as Softcat, CCS Media and Computacenter.

Skeptics suspect that the Microsoft Surface's sudden turnaround from dud to stud is nothing more than inventory control. After getting burnt on the Surface RT write off, critics say Microsoft probably didn't order as many units for the second-generation launch. Microsoft won't say, but has told media outlets that it's working with manufacturers to build more units to meet demand.

Whether or not Microsoft intentionally shorted inventory, it's clear that the Surface stockpile was insufficient for the demand. And Microsoft did a lot to drive demand, blitzing the market with advertising promoting the versatility and functionality of its tablets.

Microsoft has precious little experience in hardware inventory management. Despite offers from distributors to help regulate supplies, Microsoft has steadfastly maintained its course on using Surface as a logistics learning experiment. This should concern resellers as Microsoft continues to prep Surface for broader channel distribution.

In recent weeks, Microsoft has been surveying select partners about their desires to resell Surface and their willingness to submit to stringent restrictions. Based on the survey questions, Microsoft wants authorised Surface partners to accept losses incurred with Surface tablets by not discounting unsold units and destroying excess inventory. The survey lends itself to Microsoft saying it wants Surface reseller partners complicit in it "stuffing the channel" to pad sales numbers.

Microsoft tells Channelnomics its surveying of channel partners is just information gathering and does not reflect actual policy or intent.

Nevertheless, the Surface survey does show Microsoft is gearing up for expanding Surface sales through partners. And the inventory shortages does lend credence to Microsoft's excuse for not working more with channel partners; Microsoft has said consistently that it wouldn't expand Surface into the channel until its processes and systems were ready.

In 2011, when Microsoft was gearing up for the release of Windows 8, analysts predicted that the entry of a tablet-friendly version of the Windows operating system could expand the total addressable mobility market by drawing in users who had resisted Apple and Google products. And, just as Samsung experienced slow sales of its initial tablets, Microsoft is beginning to see the fruits of its labours pay off. What we may find is Surface and other Windows tablets may still prove themselves viable, if not best sellers.

As part of our special editorial partnership, CRN is publishing this from Channelnomics.

 

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Send to  

• Topics
• Vendor
• Microsoft