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Report: Second-Gen Surface in Works, Nvidia CEO Says

Despite struggling with its Surface line of tablets, a recent CNET report suggests Microsoft is plowing ahead with developing the Surface 2.

Chip maker Nvidia is collaborating with Microsoft on the next generation of the Surface tablet, Nvidia CEO Jen-Hsun Huang confirmed to CNET in an interview on Thursday. Microsoft declined to comment.

Nvidia supplied its quad-core Tegra 3 processor to power the Surface RT, which launched in late October. The Surface RT runs Microsoft's Windows RT operating system for ARM-based processors. Since its launch, the tablet has foundered in the market. Explanations have tended to focus on a lack of apps for the device (Surface RT machines can only run Windows Store apps, not Desktop apps), as well as less computing power with ARM chips versus x86 chips.

High prices and ineffective marketing by Microsoft have also been cited as reasons. Acer chairman J.T. Wang recently said that "the Windows camp has to do something to reestablish or reinforce confidence among PC users," according to a report Thursday by The Wall Street Journal. On the x86 side, that effort may come from lower-priced Intel Bay Trail chips, with Intel forecasting low-cost laptops to come this year.

ARM-based Windows RT machines in general represent just a small slice of the PC market. Recent data from IDC on the second-quarter global tablet PC market indicates Windows RT shipped on just 200,000 tablet devices, most of those Microsoft's own Surface RT tablet. The OS finished the quarter with 0.5 percent market share.

Together, the Surface RT and Surface Pro earned Microsoft $853 million in revenue in FY 2013, according to its most recent 10-K filing. However, that is not enough to offset the $900 million write-down Microsoft took in its fiscal fourth quarter to cover "Surface RT inventory adjustments."

To boost sales, Microsoft slashed the cost of its Surface RT devices by $150 in mid-July, followed by a $100 price cut to its Surface Pro line this month.

The Surface RT, like all other devices running Windows RT, did not come with the Microsoft Outlook e-mail program, although the Surface RT does come bundled with Office Home and Student 2013 RT. The omission of Outlook was a factor that contributed to the product's poor reception, Huang told CNET. Microsoft has since announced that Outlook will be included in the Windows 8.1 RT OS update expected to be released in the fall. Windows 8.1 RT will be a no-cost update for all Surface RT devices.

"It is the killer app for Windows," CNET reported Huang as saying. "Now we're going to bring it with the second-generation Surface."

About the Author

Gladys Rama is the senior site producer for Redmondmag.com, RCPmag.com and MCPmag.com.

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