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The Truth About Microsoft’s Sold-Out Surfaces



By Timothy Stenovec

Credit: huffingtonpost.

Credit: huffingtonpost.

The shocking news arrived this weekend: The Surface 2 and Surface Pro 2, Microsoft’s second-generation “iPad killer” tablets, sold out in many stores.

Microsoft’s been trying for years to catch up to Apple in certain areas, releasing the now-discontinued Zune to challenge the iPod and designing its own operating system for smartphones. The company’s first attempt at building its own tablet was a disaster: Relatively few people bought the Surface RT, the base model, which started at $499, and Microsoft wound up having to take a $900 million charge at the end of its last fiscal year for unsold inventory and a $150 price drop.

Yet, according to a report from Mashable on Sunday, the second iteration of Microsoft’s tablet, the Surface 2 and Surface Pro 2, was sold out at Best Buy stores in several states, on and on Microsoft’s website.

What’s going on?

Microsoft isn’t saying much besides that it’s excited to see the consumer response and is working to keep up with demand. We reached out to analysts and a Surface 2 owner for our answer.

Bottom line: Apple has little to worry about. Microsoft just seems to have figured out that it shouldn’t make so many devices, lest it risk another embarrassing write-down. And, apparently, the Surface 2 isn’t as bad as the first version, according to one Surface 2 user who got in touch with us.

Michael Cherry, the lead analyst of operating systems at Directions on Microsoft, an independent advisory firm in Washington that tracks the company, speculated that Microsoft “produced a smaller run with the intent of selling out.”
“They really made what they thought they could sell,” he said. “Good for them — they were right.”

The Surface 2 and Surface Pro 2, which went on sale this fall and start at $449 and $899, respectively, are Microsoft’s latest attempt to win share of the lucrative tablet market, which the company entered disastrously late. The original Surface models, first sold in 2012 and early 2013, didn’t do particularly well with consumers.

Microsoft sold $853 million worth of Surfaces during its most recent fiscal year. By comparison, “Apple’s iPad sales during roughly the same time frame were $33.2 billion,” The New York Times’ Nick Wingfield pointed out in September.

Sales of Surface tablets jumped to reach $400 million in the quarter that ended Sept. 30, and Microsoft sold more than twice as many Surfaces that quarter as the previous quarter, the Wall Street Journal reported. But the doubling was likely due to heavy discounts on the Surface RT, the Journal noted.

A cursory look at Best Buy’s website on Tuesday morning showed 32- and 64-gigabyte configurations of the Surface 2 “unavailable” for in-store pickup in stores around New York City, Philadelphia and Los Angeles, though at least one configuration of the Surface Pro 2 appeared to be in stock at some of those same stores.

A Best Buy spokesman told HuffPost that the company receives new shipments all the time, and just because the device is shown as unavailable online doesn’t necessarily mean it’s out of stock in the store.

“Last year this quarter they shipped way too many [tablets] so they learned their lesson,” said Jitesh Ubrani, a research analyst for IDC’s Worldwide Tablet Tracker. “This quarter they’ve reduced the shipments.”

All configurations of Microsoft’s latest tablet, save for the 128-gigabyte Surface Pro 2, were listed as “out of stock” on Microsoft’s website Tuesday morning.

“The public response to Surface has been exciting to see,” Ben Reed, senior manager of Surface, wrote in an email to HuffPost. “It is our primary goal to get Surface 2, Surface Pro 2 and new Surface accessories into the hands of all people who want the most productive tablets on the planet. We’re actively working with our manufacturing teams and retail partners to get Surface in their hands as soon as possible.”

The new tablets received a positive review from The New York Times, and Microsoft is spending a significant amount of money on marketing them.

Chris Jones, vice president and principal analyst at Canalys, an independent analysis firm, wrote in an email that marketing efforts by Microsoft and Intel, as well as an increased retail presence, “will help Microsoft and its partners build some momentum.”

“However,” he wrote, “against Apple and a raft of low-cost Android tablets, it is still going to be a long road for Microsoft in tablets.”

Apple’s share of tablets shipped worldwide last quarter was 29.7 percent, while Samsung’s was 19.7 percent, according to IDC. Microsoft accounted for only .7 percent of tablets shipped worldwide. Microsoft declined to provide sales figures to The Huffington Post.

The Surface is marketed as a tablet/computer hybrid that can serve both the needs of work and play — that is, it can be used as a laptop but also as a tablet to stream movies and play games. PC sales have declined as an increasing number of people have turned to mobile devices, and Microsoft is hoping the Surface will partly fill that void and attract those who want the functionality of both a tablet and a laptop.

Gerald Tucay, a 38-year-old accountant who lives in Santa Barbara, Calif., traded in his Surface, which he said was “sluggish” and would “crash frequently” and drop its Wi-Fi signal. He got a Surface 2, and has so far been “very happy” with it, he said.

“What I like about the Surface is the portability and [Microsoft] Office,” he wrote to HuffPost in an email. “I don’t see it as a replacement of my desktop/laptop but an extension of it.”

“The Surface 2 doesn’t crash any apps even when I have 5-6 apps open, [and] Wi-Fi dropped only a few times,” he added, noting that battery life is “slightly longer.”

“But overall, [it’s] much faster than the first one and the display is great. Minor hardware upgrades, but [that] makes a big difference.”
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