Microsoft will drop its Surface business by the end of 2019, according to Canalys CEO Steve Brazier.
Speaking at the welcome keynote at the EMEA Canalys Channels Forum event in Venice, Brazier said Microsoft's Surface range will be the first business segment to be scrapped as a result of the "capital expenditure challenge" that the firm will face under CEO Satya Nadella.
"Microsoft will exit the Surface business by 2019," said Brazier.
"Two reasons: Satya Nadella is a software guy, he's a cloud guy. He already allowed [Microsoft's] mobile phone business to decline. Secondly, the Surface's performance is choppy, it has had good quarters and bad quarters but overall it is not making money.
"It doesn't make sense for them to be in this business. And when the capital expenditure challenge that Satya Nadella is taking Microsoft down becomes visible to Wall Street… he will have a lot of cost cutting to do, and Surface will be the first target."
Product sales fell for Microsoft in Q2 by 1.5 per cent to $13bn (£9.7bn), while Surface sales dipped two per cent having previously plummeted by 26 per cent in the previous quarter.
The Surface laptop has also endured some scathing reviews from US-based consumer group Consumer Reports, which criticised the product's reliability and removed its "recommended" status from four Surface devices.
Commenting on Brazier's forecast during a Q&A session, Lenovo's COO Gianfranco Lanci said Microsoft could exit its Surface business even earlier.
"It might be earlier," he said. "I share [Brazier's] view, Microsoft is making a lot of money on the cloud and enterprise and on Windows, and it is definitely losing a lot of money on devices and I see no reason why they would want to continue with the Surface."
Brazier also predicted that this quarter will prove the highest growth quarter for the western European tech industry for 10 years.
The CEO forecasted that 50 per cent of cloud sales will go through two-tier distribution by the end of 2019 and also claimed that channel partners will grow by five per cent per annum over the next three years. Lastly, hardware sales will account for at least 50 per cent of revenues for at least 90 per cent of partners by 2020, according to Brazier.
"Hardware is not dead. Hardware will be 50 per cent of your revenues through to 2020. Do not listen to your investors telling you to get out of hardware and into services. There is no evidence to support that at all," he said.
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