Microsoft may not want smashing Surface RT tablet sales

Analysts say Microsoft is likely looking to seed market for key Surface partners like Lenovo and Samsung

The reported slow early sales of Microsoft's Surface RT tablet has raised a question among IT analysts -- does Microsoft truly want to produce boffo sales of the new device?

Some analysts say that Microsoft can't afford to have smashing Windows RT- or Windows 8-based Surface tablet sales to avoid outselling (and offending) key partners Lenovo, Samsung and others that sell branded Windows-based tablets. The partners must pay Microsoft a licensing cost to run Windows on the tablets.

"I've believed all along that the [Microsoft] goal is not to be the leading tablet hardware vendor, but rather to [use Surface] seed the market with Windows 8 tablets," said Jack Gold, an analyst at J. Gold Associates.

"Microsoft wants to have enough devices sold to get people interested in Windows 8, then basically turn over the market to its Original Equipment Manufacturers (OEMs)," Gold added. "This is the same strategy that Google uses with Android phones and tablets."

The real money for Microsoft and Google comes not from hardware, such as Surface or Nexus 7 tablets, but from sales of apps and services from the App Store, Google Play or iTunes, Gold and other analysts say.

"Modest sales for Surface could still be to Microsoft's advantage by showing vendors that Windows 8 tablets have legs in the market and in [creating] an installed base from which to build," Gold said.

While IDC analyst Ryan Reith said Microsoft could afford for Surface to outsell other Windows 8 tablets, he also mostly agreed with Gold.

"Given Surface RT's limited distribution, it makes sent that it probably won't outsell others," Reith said.

"Microsoft would have pushed these tablets to all channels if it was going for large volume, but given that it didn't tells me that it is more about setting the bar for what it wants its OEM's to develop and about platform exposure." he added. "Basically, the Surface acts as a handbook for 'This is how we've like you to building tablets on Win 8.'"

Reports surfacing last week said that Microsoft is ready to supply Surface tablets to retailers beyond its own 31 stores and 34 holiday specialty stores.

A Microsoft announcement of that kind could come as early as Monday or tomorrow, according to several industry sources.

The rationale for adding more stores would be sluggish Surface sales.

Boston-based brokerage firm Detwiler Fenton last week estimated that Microsoft would sell 500,000 to 600,000 Surface RT tablets in all of 2012, while IHS iSuppli projects sales of 1.3 million Surface units by year's end.

Surface RT, a 10.6-in. tablet, went on sale starting at $499 on Oct. 26.

The 10.6-in. Surface Pro, formally called Surface with Windows 8 Pro, will go on sale in January, starting at $899.

Analysts say sales of the Google Nexus 7, which launched in June for $199, is now at about 1 million a month, up from 500,000 early on. Apple, meanwhile, has typically sold several million units of any of its iPad tablets and iPhones in the first few days of sales.

Microsoft today didn't respond to a request for comment on its sales or retail strategy.

Matt Hamblen covers mobile and wireless, smartphones and other handhelds, and wireless networking for Computerworld. Follow Matt on Twitter at @matthamblen, or subscribe to Matt's RSS feed . His e-mail address is mhamblen@computerworld.com.

Read more about tablets in Computerworld's Tablets Topic Center.

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Matt Hamblen

Computerworld (US)
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