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Can Surface survive the new Microsoft?

Can Surface survive the new Microsoft?


Losses mount as Surface starts to look more Zune-like

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Back in May, Microsoft was planning to unveil a smaller "Surface Mini" at an event in New York City. It never happened. Instead, Microsoft CEO Satya Nadella axed the announcement to focus on a Surface Pro 3 unveiling. Nadella went on to highlight Surface Pro 3 as "a great example" of how Microsoft will approach first-party devices in the future, with a focus on productivity for its tablet hardware.

That new focus on Microsoft as a productivity company could spell the end for projects like Surface Mini, or even the larger ARM-based versions of Surface. Calculations by Computerworld suggest that Microsoft has lost $1.7 billion on Surface hardware, including the $900 million write-off for the Surface RT last year. That’s a huge loss for something Nadella describes as an effort to "stimulate more demand for the entire Windows ecosystem." Microsoft has thrown similar amounts of cash at Xbox over the years, but the Xbox 360 sales have proven there's demand for Microsoft's games consoles.

Is the Surface Pro 3 another Zune HD?

While Surface Pro 3 has been well received thanks to its many refinements, if it doesn’t sell well then it could be another Zune HD. Microsoft polished its Zune portable music player to the point where the Zune HD was a good product before the project was killed off as iPod sales dominated. Microsoft has made similar Zune-like mistakes with its Surface approach, but it appears to have nearly nailed the idea of a "productive tablet" with the Surface Pro 3. A strong international expansion this month suggests that Surface Pro 3 will be an intense area of focus for Microsoft’s tablet ambitions, but is it all too late?

Nadella has proven he’s willing to kill off projects that don’t fit with the new Microsoft and his attempts to change the core of the company. Microsoft may have acquired Nokia, but it’s killing off all of its feature phones in an effort to focus solely on Windows Phone at the low- and high-end. If the Surface Pro 3 isn’t successful in turning Microsoft’s Surface losses around, then it makes its existence a lot harder to justify, especially when Microsoft is no longer a "devices and services" company.