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Microsoft's Long Game on Surface Gets Longer

Surface
Microsoft always plays long games, and the Microsoft Surface is no exception. But a recent analyst's credible downgrade of Microsoft Surface RT sales for the fourth quarter suggests the long game is getting even longer.

I argued recently that with the pricing of the original Microsoft Surface, Microsoft wasn't aiming for a blockbuster success. Instead it just probably wanted to stay in the consumer conversation and keep a place in line for the Microsoft Surface Pro, which is Microsoft's best chance for beating Apple back from the enterprise. (The full column, along with a lively thread, in which readers alternately make good points and/or tell me I'm completely wrong, is available here.)

The analyst is Brent Thill at UBS AG and he cut his estimate from 2 million units to 1 million units for the quarter ending in December. Yes, Microsoft CEO Steve Ballmer has said Microsoft expected to sell a "few million" Surfaces in its first year. But selling 1 million in the quarter when it launched, during the holiday season, in conjunction with a huge ad campaign? I find it hard to believe that kind of number was even on the low end of anybody's "slow but steady" sales projection PowerPoint slide in Redmond.

Because the numbers appear to be disappointing, don't expect any word at all from Microsoft. When a product performs poorly, Microsoft has a big enough balance sheet to bury it and hide the details from investors. Next week's earnings call is almost sure to be devoid of numbers for Surface sales.

Nonetheless, Microsoft is used to disappointingly slow starts for its long games lately. Look at Bing vs. Google or Windows Phone vs. iPhone/Android. If those two are any guide, expect Microsoft to do what it's been doing -- keep diligently plugging away. The company took the time (probably too much) to set a coherent mobile strategy behind the current product mix, and it has little choice now but to press on.

Next up, the Surface Pro. Panos Panay, the general manager for Microsoft Surface, Tweeted this week, "On my way to the factory to check out #Surface Pro coming off the line...arriving in the coming weeks." In his report, meanwhile, Thill wrote, "Surface Pro is the more promising" model.

Be that as it may, given Microsoft's recent track record, expect a slow start for Surface Pro.

Posted by Scott Bekker on January 16, 2013


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