Author: Bruce Guptill

To great fanfare, Microsoft announced its new Surface tablets this week. The demonstrations showed a well-designed piece of hardware that shows tremendous promise to help Microsoft establish and grow a user presence, and therefore ecosystem and revenue presences, in the fastest-growing computing segment today.

The Surface tablets offer a few innovations, including a built-in kickstand and combined keyboard/face cover, along with a solid set of functional capabilities that should be expected in any competitive tablet device today. Pricing has not been set, nor has availability. Given that the tablets will require the widespread availability and use of Windows 8, and that Windows 8 has not been released (and is still building early developer and support ecosystem presence), it’s really up in the air right now as to whether or not the Surface line will succeed. It certainly looks competitive from our point of view. The Surface specs and functional details are outside the scope of this Research Alert.

While most analyst and media reports have positioned Surface as a potential iPad “killer,” Saugatuck sees it quite differently. Microsoft’s Surface line is actually an indicator of the following strategic market shifts:

1. Microsoft finally acknowledges and is ready to address the slow decline of the traditional PC market as a growth opportunity;
2. Microsoft sees the need for, and is willing to make, significant yet incremental changes to its own business structure and positioning; and
3. Microsoft sees its traditional PC partners as unwilling or unable to deliver what Microsoft needs to compete.

At the bottom line, Microsoft is positioning itself as squarely in the workplace / productivity hardware business, competing directly against its Windows hardware partners for a market that has not yet fully emerged.

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