Slashdot Mirror

← Back to Stories (view on slashdot.org)

Why Is Microsoft Setting More Money On Fire With Surface 2?

Posted by timothy on from the producers-was-a-prequel dept.

Nerval's Lobster writes "Never mind that sales of the original Surface totaled a pitiful $853 million in its first few months of release, or that the tablet failed to make Microsoft an up-and-coming player (or any kind of player, really) in the mobile-device wars: Microsoft's now rolling out Surface 2 and Surface Pro 2, which feature upgraded specs and accessories but no radical adjustments to the first generation. Why would Microsoft pour good money after bad? The answer could be outgoing Microsoft CEO Steve Ballmer, who late last year released a memo suggesting that Microsoft was evolving into a 'devices and services' company. 'There will be times when we build specific devices for specific purposes, as we have chosen to do with Xbox and the recently announced Microsoft Surface,' he wrote. 'In all our work with partners and on our own devices, we will focus relentlessly on delivering delightful, seamless experiences across hardware, software and services.' That meant Surface (then on the cusp of release) was clearly a harbinger of the company's future direction — and canceling the project after the first generation would have been a stinging refutation of Ballmer's strategy. By spending the money and resources on a second device generation, Microsoft manages to save a little bit of face, albeit at considerable cost. But imagine the hilarity that'll ensue if this second generation goes down in a huge ball of flames like the first."

9 of 616 comments (clear)

  1. XBOX? by a_nonamiss · · Score: 5, Interesting

    The XBOX 1 lost 4 billion dollars. It's now a solid market that Microsoft dominates. Why would they not use that same strategy here?

    --
    -Arthur
    Cave ne ante ullas catapultas ambules
    1. Re:XBOX? by Anonymous Coward · · Score: 5, Interesting

      The point is they took a market that was solidly held by a few companies and squoozled their way into it by throwing vast amounts of money and a few really successful games.

      Sony did this back in the 90s and may have been the template for Microsoft's success.

      The trouble is the mobile devices market isn't the same as the console market where you make a machine and let it ride for 5 to 10 years on software, this is a very fickle and expensive market to play in where if you aren't lumping features in every year you get considered dusty. If you lump the wrong features in you seem uncool.

      Microsoft can't treat the trendy throwaway electronics game the same brute force way, unless they want to bankrupt themselves...?

    2. Re:XBOX? by Sarten-X · · Score: 4, Interesting

      whenever they're pressured to explain the success of the Wii.

      Nintendo's success is easily explained. The Wii simply isn't a video game console, so it never had to compete against the "real" consoles. Sure, it has gaming hardware like a console, and it connects to a TV like a console, and it uses controllers like a console, and it plays games like a console...

      ...But it's different. The whole system is designed to appeal not so much to "gamers", but more to grandparents. It is a console for the masses, to entertain everybody to some degree. It's not the system you turn to for the latest pixel-pushing eye candy. It's what you use to see a silly cartoon character run amok in a fantasy world.

      To the kids of the 80s, this is a betrayal. Nintendo was there from the beginning, and now it's abandoned its loyal fan base. To Nintendo, this is what it has always done best, drawing on the heritage of the NES, Game Boy, and DS lines. It makes "entertainment systems", good for quick entertainment that doesn't require much thought. Whenever it's tried to push the limits of technology (N64 and Virtual Boy come to mind), they rush the technology without considering the humans using it. The Wii is very human-centric, from its very name to the first commercials ("Wii would like to play"), so it appeals to a large market that only slightly overlaps with the True Gamers.

      That's why the gaming industry often seems to have trouble understanding the Wii. It's outside of their normal world, and perhaps rightly so.

      --
      You do not have a moral or legal right to do absolutely anything you want.
    3. Re:XBOX? by Kjella · · Score: 3, Interesting

      Neither the XBone or PS4 are going to tank, they're both very capable machines with a strong following. They're profitable now (indeed, have been for 5 years) and it'd be an awfully long uphill battle for anyone else to enter the market. With the WiiU sales being crap it's basically down to a duopoly, you really think Microsoft and Sony want to go on an all-out price war for your benefit? No, you'll be paying enough that both enjoy a comfortable profit margin. Ten years ago the gaming division was a huge money burner, today it's a money maker. If Microsoft wanted to sell their gaming division, how much more could they cash in than 10 years ago?

      For long-running businesses that have a steady cash flow the stock market has usually put a P/E ratio of 10-20 on it, that's price to earnings and currently Microsoft as a whole is at 12.59. Last fiscal year the gaming division earned $380 million, so if we take the average P/E it's probably worth around $380*12.59 = $4.8 billion while the money losing division ten years ago was probably close to unsalable. So if you include that Microsoft has actually turned a profit in the last 10 years, it's just that most is still in their pockets as an asset. If they really wanted to, they could almost certainly sell out the division for more than those $3 billion.

      --
      Live today, because you never know what tomorrow brings
    4. Re:XBOX? by technomom · · Score: 4, Interesting

      This is Microsoft's huge problem. It's like the have complete idiots in their marketing department.

      "I know, let's call the THIRD generation of our XBox product, the ONE!"

      "Let's brand two completely different platforms (three actually) under the Surface name!"

      "Let's have Programs and Apps kinda be the same, but different."

      So much facepalm lately for MS.

    5. Re:XBOX? by Defenestrar · · Score: 4, Interesting

      I don't think MS is treating this as the trendy electronics game. I think they're trying to build an enterprise case for changing the whole computer interface model. A quality tablet should be able to replace every laptop within a company (and once people get used to it) be a far more natural tool (the laptop's design constraints decided its form factor). With the ability to run native Windows programs, you also don't have to worry about multiple styles of program licensing (i.e. corporate iPads, etc...), can use enterprise ready solutions, and not worry about separate policies or what happens inside of the firewall (other than the regular nightmares).

  2. You see this in small businesses by Cpt_Kirks · · Score: 3, Interesting

    You see small businesses make this mistake all the time: "If we only double down, and do what is NOT working HARDER..."

    Then, they go under. If M$ does not shed the Ballmer curse soon, Apple will BUY them.

  3. Ah slashdot bias.. by bravecanadian · · Score: 4, Interesting

    I agree about the ARM version. And I know how great it is to bash Microsoft in absolutely every thread their name appears..

    However, the Surface Pro 2 looks very attractive. I am buying one.

  4. Re:I seriously like my Surface Pro tyvm by geek · · Score: 5, Interesting

    Though I'm used to the default MS bashing here -- I have to wonder have many people have actually USED a Surface (esp the Pro) for more than 5 min in a MS store or at a friend's house?

    I have two sitting here in front of me. I had to build the win8 image to push out via SCCM for our enterprise. The Surface pro is fucking terrible. What's the point of it when you spend 99% of your time on the windows desktop instead of Metro?

    The entire device lacks focus. It doesn't solve a particular problem (although the multiuser aspect is nice on our domain).

    If the Surface disappeared today no one would care. I was actually hopeful as I'd like to see some competition in the market. The Surface however isn't it.