Computers, Mobility

Surface 3 makes Microsoft a channel competitor

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Microsoft Surface 3Microsoft Corp. is officially no longer a channel-centric vendor. The release of Surface 3 with no significant change in channel policy means Microsoft is now competing head-on with its longtime OEM and PC reseller partners for the same business.

The 12-inch display Surface 3 became generally available June 20 through Microsoft’s Web site and retail stores, select DMRs and retail partners. Consumers and businesses can order versions running Intel’s Core i5 processor with either 128 or 256 gigabyte memory. Versions running the Core i3 and i7 processors won’t become available until August.

Microsoft would have the market think it’s taking a surgical approach to marketing Surface 3, positioning it as an Apple Inc. MacBook Air killer. Microsoft says Surface 3, with its keyboard cover, is powerful to replace laptops and ultrabooks, and weighs less than a MacBook Air.

But that’s one of the problems with Surface 3: the market position isn’t surgical, but rather indiscriminant.

Microsoft is correct in its assumption that most iPad users also have a notebook that’s used as a primary or secondary device. The same could be said of users of Hewlett-Packard Co., Dell Inc., Lenovo, Acer Inc. and Samsung Electronics Co. machines, which are sold in large part through the channel.

Microsoft likes to say that Surface is available in the channel. It’s true. Microsoft made Surface tablets available to retail partners Best Buy and Staples just two months after launching the device in 2012 — mostly in an attempt to jumpstart sagging holiday says. A year ago, Microsoft launched the authorized device reseller (ADR) program, in which a dozen U.S. DMRs such as CDW and TigerDirect were given access to Surface products. The program has expanded to nearly two dozen countries, but the total number of direct market resellers carrying Surface is under four dozen.

The first two generations of Surface were little more than just ordinary tablets running Windows 8. There was hardly anything distinguishing them from devices by rivals such as Apple, Samsung and Acer, except for the operating system. Surface sales haven’t been robust to date, as the platform lacks the same depth of applications – particularly on the RT versions – and users have complained that the Surface 8 interface is that aims to blend the desktop and mobile worlds is kludgy.

Microsoft continues to work on improving the Surface user experience. However, it makes no apologies for its limited channel strategy. Partners have said they’ve been turned away when they ask their channel account managers and Microsoft executives about Surface availability. Distributors say they’ve received little interest from Microsoft in helping to develop logistical support. And Microsoft has consistently told the media that it simply isn’t ready to release Surface to the channel.

With the release of Surface 3, is officially a competitor to its OEM and channel partners. While Microsoft is taking clear aim at Apple with its new device, it cannot hope to hit its target with surgical precision. Rather than a scalpel, Surface 3 is more like a nuclear weapon that will inflict broad collateral damage — assuming, of course, it’s successful. And that’s the other reason Microsoft is now a competitor to its broader partner spectrum.

Thus far, the Surface family hasn’t exactly lit up the sales boards. Last July, Microsoft wrote off more than $900 million on unsold Surface RT and accessories inventory. In the first quarter of 2014, analysts estimated that Microsoft has lost $1.2 billion on Surface since its 2012 launch. Microsoft doesn’t release Surface sales figures, but estimates place the device’s market share in the low single digits. If Microsoft is going to gain appreciable market share with Surface 3, it will have to take share away from more than just Apple, which holds just 10 percent of the total PC market.

Worse for Microsoft, Apple’s PC market share is falling already as users either take a single-screen approach by using only their iPads or defecting to alternate platforms. Who’s already winning against Apple? None other than Google Inc. Chromebook sales are surging in the education sector, where Apple has long dominated. The low price is what’s making Chromebook appealing to education buyers; and that’s a factor Microsoft can’t beat. So, if education is going to Google, Microsoft must target more than just selective Apple products.

HP CEO Meg Whitman labeled Microsoft a rival in October 2013, as the shift from the longstanding WinTel computing paradigm and complementary channel model was being disrupted by mobility and ARM processing trends. Surface 3 has made the Microsoft competitive evolution complete.

This article originally appeared on Channelnomics.