Microsoft Inches Closer to Channel With Surface Updates

Microsoft Surface ProAs Surface tablet sales gain a bit of traction in the channel, Microsoft Corp. is adding some grit to the track with a spate of updates for the next version that could make the fondleslabs even more attractive to business buyers.

Microsoft on Monday held a press conference to show off its Surface 2 and the Surface Pro 2 tablets, which are due to be released next month with host of performance upgrades, a sleeker form factor and several new add-ons — including a docking station –aimed at making the devices more competitive with its chief rival, the Apple iPad.

Microsoft is under increasing scrutiny over its strategy and performance with the Surface. In July, Microsoft had to write off $900 million in unsold Surface RT inventory and accessories. Analysts estimate Microsoft has sold 1.5 million Surface units since they hit the market in October 2012; sales are a far cry from those of market leader Apple, which sold more than 75 million iPads in the same period.

The Surface 2 running Windows 8.1 RT starts at $449 and will boast better battery life, an upgraded ARM-based Nvidia Tegra 4 processor, and full HD 1080P on its 10.6-inch display. Available in 32GB and 64GB flavors, the Surface 2 also sports better front and rear cameras and comes loaded with Office 2013 RT.

Of more interest to businesses and resellers, the beefier Surface Pro 2 is being billed as a laptop replacement device with a more powerful Intel Core i5 processor, a high-speed USB 3 port and storage options of 64GB or 128GB. Running Windows 8.1, the Surface Pro 2, which starts at $899, supports (but does not include) the full, standard version of Office. The device is designed to be “a true laptop replacement, capable of running virtually all your Windows software,” company officials said in a statement.

“What should be the killer app is Microsoft Office,” Avi Greengart, an analyst at Current Analysis, tells Reuters. “The Surface Pro has a place as an ultra-portable notebook replacement. If you value the touch screen form factor at that price point, it’s a reasonable option.”

Microsoft on Monday also introduced a line of thinner, back-lit keyboards which double as covers, and is sweetening the pot for Surface buyers by attaching some of its other services, namely free Skype calling to landlines in 60 countries for a year and 200 GB of free cloud storage on SkyDrive for two years.

The Surface tablet’s positioning as a PC replacement – and a boon to the channel — is likely to get more of a boost in early 2014 when Redmond says it will release a docking station for both versions that will allow them to connect to an external monitor, an Ethernet network and up to four USB devices. Microsoft hasn’t bowed to channel pressure to make Surface generally available for resale. However, the release of a Surface docking station could change the equation, making the Surface a better substitute for a traditional computer, and accelerating sales of such devices would require a broader channel effort.

Not everyone was so enamored of the updated Surface tablets, however.

“I don’t see much incentive for people to buy these devices,” technology analyst Jack Gold of J. Gold Associates in Northborough, Mass. said in a research note. “Yes, they are cheaper than the iPads, but is that enough reason?

“It doesn’t look like Microsoft has done much that is compelling to overcome the negative perceptions,” Gold wrote. “It seems like Microsoft is just maintaining the traditional PC mantra – keep upgrading the chip and hardware a little bit every year at a slightly lower price.

“I think they needed to do something that was innovative beyond the first gen, and I don’t see that in these devices,” said Gold. “I think they’ll continue to sell a few, but I don’t think this will dramatically alter their sales trajectory.”

Gartner analyst Carolina Milanesi struck a more moderate tone on the new Surface tablets. “This is about Microsoft making sure people understand Microsoft is here and will be part of the future of computing,” she said. “But I think the competition is still very tough.”

The new Surface tablets are available for pre-order today and will hit store shelves on Oct. 22.