Microsoft has three critical product launches coming up, and only one of them is Windows 8.
The other two critical product launches are:
- The "Surface" tablet (Microsoft's integrated iPad)
- Windows Phone 8 and the now-expected Microsoft Phone (two different launches--the latter product hasn't been announced yet).
These two products won't generate much revenue for Microsoft, but they're still critical.
Why?
Because the world's going mobile, and Microsoft is nowhere in mobile.
On the phone side, Microsoft's Windows Phone software has been well-reviewed, but consumers just don't see the need for it. Mobile is now dominated by Apple's iPhone (iOS) and Google's Android. Windows-based phones are a fine alternative, but they're an alternative in a market in which few people see a need for an alternative.
On the tablet side, meanwhile, Microsoft is currently nowhere. Apple owns most of the market with the iPad, and Android owns the rest. The "Surface" is Microsoft's last best hope to make any real noise in the tablet market. And given that tablets are now cannibalizing PC sales, it is critical that Microsoft make some noise here.
Last year, in the most profound change in the computing market in two decades, more smartphones and tablets (mobile) were sold worldwide than PCs (see chart below). Overall, Windows has only a tiny sliver of this mobile market. The more share Microsoft loses in mobile, the more share Microsoft loses of the overall personal computing market. And the more share Microsoft loses in the personal computing market, the less valuable Microsoft's "platform" becomes.
In our opinion, there is very little chance that Microsoft and its hardware partners will ever be able to turn around Microsoft's fortunes in mobile. But any chance is better than no chance. So these product launches are critical.
Microsoft started taking pre-orders for the Surface tablet last week.
So, what's the customer demand for the "Surface" been like so far?
Microsoft was asked that question directly on its earnings call last night.
It's answer was not encouraging:
QUESTION (Goldman analyst Heather Bellini): [C]an you give us a sense of your expectations for Surface in the quarter, or if you can’t do that, can you give us a sense for what pre-orders were thus far, just to give us a sense of how that’s ramping out of the gate and what your expectations are there for that?
ANSWER (Microsoft CFO Peter Klein): Yeah, thanks Heather, right now we’re focused on our launch both of Surface and Windows 8 next week and so that’s really what we’re excited about and the opportunity to show people all the great devices, all the great capabilities and so we’re not talking about that now.
Translation: How are 'Surface' pre-orders? No comment.
If the pre-orders for the "Surface" had been impressive, it seems a safe bet that Peter Klein would have said so.
