Skip to main content

Microsoft and Hardware: A Match Made In Revenue Hell

Good as it promises to be, the Surface Pro 3
should be the end of the line
Microsoft had quietly been building itself an income stream from hardware for years - from Windows 3.0 and the first Microsoft Mouse, through keyboards, webcams and then the Xbox, little by little Microsoft turned hardware into a pretty good revenue and profit stream.

Then things started to go wrong. Badly wrong.

First we had the Zune - which failed spectacularly enough for its name to become the new byword for tech failure. It at least passed some of its interface design through to Windows Phone.

Then there was Kin, the result of the purchase of Danger and a two year devlopment cycle that cost around $1bn. The Kin lasted forty-eight days on the market before being canned.

A couple of years ago Microsoft introduced the Surface range and despite favourable reviews and a positive reception to the most recently announced Surface Pro 3, it's looking like Microsoft have launched a product which is hemorrhaging money to an extent not seen in the business before.

Estimates put the current cumulative loss of the Surface group at somewhere between $1.7bn and $1.9bn. That on a product returning revenue of around $400m a quarter at a cost of $700m or more. That's an awful lot of money to be pouring down the drain rather than admit defeat and kill the product.

The Surface was designed and released to showcase Windows 8 and drive more users into the upgrade cycle. Recent figures show that Windows 8 adoption has stalled, so it's not succeeding from that viewpoint either.

For Microsoft the route ahead is clear. Kill the Surface and create a Nexus-like partnership with the OEMs that are still prepared to work with you. Work with them to build great products, not in competition with them.

Times have changed, and Microsoft's software and services divisions aren't generating the sorts of profits that can subsidise whimsical adventures into market spaces where the only prospect is one of growing long-term losses.


Popular posts from this blog

F1: Robert Kubica Impresses In Renault Test Run

The car may be old but its the performance of the driver that's the story here. Robert Kubica returned to F1, after a fashion, earlier this week with an extensive test run in a 2012 Lotus Renault F1 car at Valencia.
The age of the car and the circuit were likely determined by F1's current rules which ban testing, but the reason for Kubica being in the car is far more interesting. Considered by many to be a potential World Champion and certainly one of the fastest drivers of his generation, Kubica's F1 career seemed to be over after a 2011 crash whilst driving in the Rally of Andora. His Skoda Fabia was penetrated by a guardrail in the high speed accident partially severing his right arm.
Up until last year Kubica has been competing in rallying, with the expectation that the limited movement in his repaired arm would prohibit a return to single seater racing.
So this week's test is both interesting and confusing. Interesting because Kubica completed 115 laps of the ret…

Panos Panay's Defence Of Microsoft Surface Hardware Sounds Eerily Familiar

This weekend I went out with my ten year old daughter to select a laptop for her school year beginning in January. The schools requirements are quite specific, requiring a Windows 10 device, with a preference for a touchscreen and a stylus. She chose a Surface Pro, after trying a large number of different options. Having seen the way I use my own Surface Pro - and tried it herself there was only ever going to be two options - and the other was a Surface Laptop.
I tell you this so that you understand I am a buyer of Microsoft's products through choice, not compulsion. I'm on my third Surface device now. 
So when Panos Panay dismissed reports of the death of the Surface hardware line, I was very interested to see exactly how strong these denials were. Especially how they reflect what has gone before. To whit: Windows 10 Mobile.
Panay claimed that Microsoft is in hardware for the long haul. Almost exactly mirroring the words of Terry Myerson, when he claimed Windows Mobile was g…

WhartonBrooks Indiegogo Windows 10 Mobile Even More Doomed To Failure Than Usual

WhartonBrooks is currently crowd-funding its latest Windows Mobile smartphone on Indiegogo. If crowdfunding isn't already a bad enough idea, a company trying to crowdfund a Windows Mobile device should be warning enough for you.
Not that anyone seems to be taking the project too seriously. With a few weeks left to run the campaign has managed to ensnare just 2% of its $1.1m target.
If you want a better indication of how few Window Mobile loyalists remain I doubt there is one. Of 3,900 Windows Phone enthusiasts Wharton Brooks was seeking for its new phone, it has managed to entice just 50.
Windows for Phones is dead, even if the corpse hasn't stopped twitching yet.