Microsoft Surface Tablet: A Double-Edged Sword
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In a conference on Monday, Microsoft (NASDAQ: MSFT) unveiled the first computer it's ever built, the Surface tablet. The tablet is the company’s answer to the Apple (NASDAQ: AAPL) iPad and Google (NASDAQ: GOOG) Android based tablets. To put it bluntly, Surface has the potential to be a beast. Besides having a 10.6” screen made out of Corning Gorilla Glass 2.0 and VaporMg (magnesium) case, the Windows 8 Pro version of Surface is a full blown functional PC running on an Intel (NASDAQ: INTC) Ivy Bridge Processor. This means that the device is compatible with legacy programs that were designed to run on Windows. Photoshop, Microsoft Office, Firefox, Google Chrome, World of Warcraft, StarCraft, and any other programs that you have installed on your PC will run on the Surface tablet.
Furthermore, Surface sports a detachable keyboard called Touch Cover that is only 3 millimeters thick. Touch Cover attaches to the tablet through a magnetic connection, acts as a protector when folded shut, has a track pad, and comes with an accelerometer so when the keyboard is folded to the bottom of the device it knows the keyboard is not in use. Surface also comes with a built in kickstand, USB, microSD, and HDMI ports. Surface looks very promising and seems to have the potential to be better than the iPad and Android based tablets.
Microsoft has posted some basic specs on its site.
As shown in the picture, Surface comes in two versions: Windows RT and the previously discussed Windows 8 Pro. While the devices are similar, they have their respective advantages. Surface Windows RT is lighter and thinner than Surface Windows 8 Pro. It is even thinner than the New iPad by one millimeter. However, Surface Windows 8 Pro has one huge advantage; it is compatible with legacy programs. Windows RT is not compatible with previous Windows software, meaning users cannot install any PC programs they want on it. Apps have to be purchased from the Windows Store.
This is where Microsoft is walking a thin line. Microsoft’s strong selling point for Surface is its backward compatibility. Consumers are able to purchase a tablet that has Windows and can function like a regular PC. However, Surface Windows RT does not have that capability. This can (most likely will) cause a great deal of confusion among early Surface buyers. The problem is worsened by Microsoft’s planned release schedule. Microsoft is planning to release Surface Windows RT at the same time as Windows 8 and three months ahead of Surface Windows 8 Pro.
This can backfire on Microsoft in a big way. Consumers who are not tech savvy and purchase a Surface Windows RT upon its release thinking that it is backward compatible, will not have the option to exchange it for a Surface Windows 8 Pro until three months later. Mass returns will likely be the result. If Surface Windows RT receives a bad consumer response, Surface Windows 8 Pro will have a tough time gaining traction. Worse, if Surface Windows RT fails, other OEMs could ax tablet plans and cause Windows 8 to fail in tapping into the growing tablet market.
Microsoft has this problem because it wanted Windows 8 tablets to run on ARM (NASDAQ: ARMH) processors. When it comes to mobile devices, ARM processors are currently superior to Intel processors because ARM processors are more efficient, smaller, and consume less power (i.e. devices have longer battery lives). This allows Microsoft and other OEM's to deliver a form factor similar to competing tablets. At the same time, Microsoft wanted backward compatibility to tap into its large PC market.
As a result, Microsoft decided to use two operating systems: Windows RT, a version of Windows 8 designed to run on ARM, and regular Windows 8 designed to run on x86 (Intel or AMD). While Microsoft uses two different names for the products, the public confusion that could result is not very easy to prevent because it depends on public perception. Currently, the naming system Microsoft has is confusing and does not provide any clarity on the devices different capabilities. As a preventive measure, Microsoft could provide clearer advertising and release both products together, but the company seems decided on the staggered release. Surface has great potential, but Microsoft needs to market the two different versions carefully. Otherwise, it could backfire and hurt Windows 8's and Microsoft's reputation and chances of successfully entering the tablet market.
Alvin has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple, Google, Intel, and Microsoft. Motley Fool newsletter services recommend Apple, Google, Intel, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.