Windows Tablets: Why Nobody Wins

It feels like I see a new Windows tablet every week or so these days. From Microsoft's Surface to the latest of many from Acer, Lenovo, and Samsung, everyone wants to get into the tablet game, but something has become abundantly clear to me over the last few weeks: No one wants to do what it takes to win. Sure, they'd like to win. Every company hopes that its new touchable device will magically become the industry leader, and will not only dominate but redefine the Windows tablet as a category. But gaining real market share in the tablet category will require a dramatic change, and thus far, nobody's willing to play hardball.

Next week, Microsoft is holding an event to show off the new incarnation of the Microsoft Surface and Surface Pro tablets. The previous Surface Pro($698.98 at Amazon) earned our Editors' Choice, and months later it's still the best among the growing crop of tablets running Windows. So why isn't it selling? And why haven't any competitors come close to challenging it?

Microsoft has lost giant amounts of money on its foray into tablets, and doesn't have a whole lot to show for it. Between October and March, the Redmond-based giant sold 1.5 million Surface tablets, while Apple sold 14.6 million iPads in the most recent quarter. Not only is the sheer difference staggering, but Microsoft's sales are slowing down, while Apple keeps moving iPads at a brisk pace. Android tablets, like the Nexus 7 and the Amazon Kindle Fire HD, also have managed to capture a large chunk of the market, and Android has even begun to show up in laptop and desktop form factors. The tablet space is just the first piece of a larger, looming conflict.

Two Battles
The problem is that Windows tablets—and Wintel in particular—face two separate battles, a war on two disparate fronts. And though gains have been made in both, it's pretty obvious that Microsoft and Intel are still losing the war.

The first battle facing Microsoft and Intel is bridging the gap between user expectations and the technology presently being offered in Windows tablets. The components needed to meet users' expectations of a Windows PC aren't what's used in most tablets. Tablets are thinner, lighter, and far more mobile than laptops; thus, manufacturers are opting for low-powered Atom processors instead of the Core processors used in laptops. As a result, the average Windows tablet experience is generally slow and underpowered. It's a difference that users can immediately feel, and thus far, no version of the Atom-powered netbook-sans-keyboard has been able to replicate the sort of fluid, powerful experience that users expect from a "real" Windows PC. It's a problem caused by the very success of Wintel and the sheer omnipresence of the PC—we know what a real PC is supposed to do, and Windows tablets fall short of that expectation. Though Intel and a dozen OEMs have been feverishly working to find designs that close that gap, it's still a pretty big deficit.

Android and iOS devices don't have this same sort of problem, because they started at the bottom. Only a few years ago, the iPad couldn't even run multiple apps simultaneously, but there was no expectation for it to do so, and there is still a gulf between the productive capability of an iPad and even a basic Windows laptop. There is still a gulf between the productive capability of an iPad and even a basic Windows laptop. That's not the case with a Windows tablet. We expect any device that calls itself a Windows PC to offer the same sort of capability and performance of any other PC. There are actually a (very) few tablets that can legitimately compare to standard PCs, but they do so by offering the same components as laptops—most importantly Intel Core processors. Anything else is a disappointment, but unfortunately, the technology needed to make it happen makes the tablets too expensive.

This brings us to the second battle being fought by Microsoft and Intel: cost. Components and performance can only take you so far. When the best iOS and Android alternatives on the market undercut the competition by several hundred dollars, it shouldn't be a surprise to anyone that those cheaper devices are dramatically outselling anything running Windows. Even though people expect laptop performance from a Windows tablet, they want it at Android prices, and the reason is Apple.

Apple's product pricing strategy—the so-called Apple tax—is very real, and well known to consumers. Apple puts out a polished product at premium prices, and consumers know it. In the case of tablets, Apple has set the price ceiling; we have yet to see a successful tablet product that sells for as much or more than the iPad. For anyone hoping to claim territory in the tablet space, it's not good enough to match Apple's pricing. You have to do better.

Biting the Bullet
That's the crux of the matter. For a Windows tablet to really take off and allow Wintel to command a significant piece of the tablet market, it needs to clear both the expectation hurdle and the pricing problem at the same time. Given enough time, this will happen on its own, with more powerful Atom processors—Intel's recently announced Bay Trail processors look promising, but aren't widely available yet—or thinner, less expensive Core processors. But after fumbling the tablet transition for a few years now, can either Intel or Microsoft continue to bide its time?

Don't think that Android and iOS products will continue to lag behind on the performance and productivity front. Other chip makers are hungry for a chunk of Intel's market share, and Apple and Google have plenty of motivation to continue advancing their respective tablet platforms as quickly as they can. Intel's even begun hedging its bets by pushing for Android and Chrome OS on Intel hardware.

You would think the solution to this problem is pretty clear. Bite the bullet and offer laptop-grade performance for iPad prices (or lower). Give up the profits as the cost of getting back ahead, and continue doing everything you can to close the hardware gap and get profitable, with the understanding that you won't be making money right away. Clearly, offering a subpar Windows experience for a higher price isn't working, and even deep price cuts aren't enough on their own to satisfy users disappointed by poor performance.

Granted, this solution really only works if either Microsoft or Intel, or both, are willing to accept a sizeable loss to get into the leading position they clearly covet. Microsoft and Intel have the funds and the influence to make a play like that work, but the various OEMs really don't; they've largely decided that Windows RT is too big a gamble to take, and many have pivoted to embrace things like Chromebooks and PC form factors running Android.

Microsoft will unveil a fresh round of Surface devices in a couple of days, with an updated Surface Pro and new Surface RT. Will it take the (admittedly drastic) step of dropping prices? Perhaps. Otherwise, we'll likely get another year of uninspired devices and lackluster sales. And Apple and Android? They'll keep doing what they've been doing all along: eating Microsoft's lunch while the company struggles to catch back up.