Telugu bidda Satya Nadella faces many challenges as the new head of the foundering technology giant Microsoft.
Among Nadella’s most formidable challenges (albeit one inherited from Steve Ballmer) – What should be done about those disastrous Surface tablets.
It’s clear to sane minds that in a million years Microsoft cannot make a success of its Surface tablets.
And the pitiful market share data proves Surface just doesn’t have a hope of taking on the more mature Android or Apple iOS (iPad) tablets.
Apple iPads have the branding, quality and fanboy advantages while Android tablets score on lower prices.
Lacking any advantage, Microsoft’s Surface tablet is doomed (Office compatibility is no longer a big deal in my opinion).
Surface Pro 2 – $899 Without the Keyboard
Surface – Billion Dollar Disaster
Late to the market, and with a confusing set of two operating systems, Microsoft has lost over a billion dollars on its tablet misadventure.
The company took a charge of $900 million last year on unsold Surface inventory and slashed prices of the older Surface models.
But the grim picture has not changed and Surface still encounters strong resistance from consumers in the marketplace.
Gartner recently put out tablet market share data for 2013 and the numbers show Microsoft in a horrible light.
Microsoft is not even a contender.
Hell, Surface is not even among the Top-5 tablet vendors.
In 2013, Microsoft sold a piddling 4 million tablets versus 70.4 million for Apple iPads.
The yawning gap between Microsoft and Apple or for that matter between Microsoft and Samsung is unbridgeable.
Even Lenovo (Android based tablets) did better than Microsoft last year with 6.52 million units.
Admittedly, the other vendors have been at the tablet game for a longer time. But that’s little consolation for Microsoft shareholders who bear the brunt of the company’s losses in low share prices.
The tablet segment is a mature market in the U.S. and recent growth has come largely from sales of low-end smaller screen tablets.
Here again Microsoft is a disadvantage.
Unlike iPad or Android tablets like Samsung or Kindle, Microsoft does not even have a smaller-screen tablet.
According to Gartner analysts, tablet sales are now growing fastest in emerging markets.
In 2013, tablet sales in emerging markets were estimated to be up 145% in 2013 compared to 31% in mature markets.
Once again, Surface tablets are at a disadvantage since its tablets are hopelessly overpriced for emerging markets like India, Brazil or China.
Surface Pro 2 tablets (based on Windows 8.1 Pro operating system) start at $900.
No typo there. $900.
And that does not even include a case or cover.
You’d have to be completely out of your mind to fork out $900 for a tablet.
Surface 2 tablets start at $450.
Nadella – Big Question
How long will it take and how many more billions will go down the drain before Microsoft’s new boss Satya Nadella sees the light and pulls the plug on Surface.
Given what we know of Nadella and his lack of bold moves in the past, it’s unlikely the Telugu bidda has the cojones to pull the plug on Surface any time soon.
Surface tablets will limp along, bleeding red on Microsoft’s quarterly balance sheets.
Microsoft will continue to take huge losses on these devices for the foreseeable future until one fine day it’s compelled to launch a fire sale a la HP to get rid of the inventory.