Apple inflicts major Surface damage on Microsoft -- probably doesn't even care

Yesterday was unquestionably the day of the tablet. Nokia unveiled the Lumia 2520, its first Windows RT 8.1 slate, Apple announced the iPad Air and iPad mini with Retina display, and Microsoft’s Surface 2 and Surface Pro 2 went on sale.

It was unfortunate timing for Microsoft. On a day when Steve Ballmer and co. would have hoped people would be talking about Surface, they were salivating over Apple instead. The fruit logo company inflicted more damage on Microsoft than just drawing focus for a day however.

Microsoft's biggest problem is getting people to care about its new Surface tablets. Surface 2 and Surface Pro 2 are the successors to products that sold poorly. Yes, both upgraded devices are much better, and yes Windows 8.1 is massively improved, but the new tablets are premium priced and the average consumer isn't likely to really understand the benefits that Surface offers over the iPad, or numerous much cheaper Android tablets.

If you use and like Windows 8.1 on your PC (and in the grand scheme of things, not many people do at the moment; the OS only came out a week ago after all), and you want to have the same experience on your tablet, then Surface is an obvious choice. Provided you want a tablet to do work on. Office is a major selling point for Microsoft, as is the existence of attachable keyboard covers. For work, Surface is a great product -- like a laptop, but much more versatile.

The trouble is, according to recent research from Gartner, users spend at least half their tablet time on games, movies and listening to music, a quarter of their time on email and social networking, and the rest on browsing the web and creating content like videos. Tablets, away from the work environment, are mostly used for fun, and Surface, in all its forms, isn't really billed as a fun product. The original devices didn't even look all that fun when they were surrounded by dancers. The Microsoft Store has lots of games and decent apps now, but it can't come close to competing with the depth of choice to be found in Apple's App Store.

At yesterday's event Apple introduced two stunning new tablets. The iPad Air is so light it can be used comfortably one handed, but yet is more powerful than its predecessor. The iPad mini has a much better display, but the same powerful guts as the iPad Air. Both look amazing. And if you put them next to a second generation Surface, Microsoft’s new tablet looks rather dated in comparison.

And what do the names say about the tablets? While Surface sounds solid and grounded, Air is lightweight and flying high.

There's another problem for Surface -- the lack of clear differentiation between models. The Surface line consists of three devices: Surface (formally known as Surface RT), Surface 2 and Surface Pro 2. The lineup closely mimics Apple's iPad selection: iPad 2, iPad mini with Retina display and iPad Air, but while the differences between the iPads are very clear (older and cheaper, smaller, flagship), the differences between Surface models is less obvious to consumers (cheaper and older, er.. and errr…).

Turn off the screens on all the iPads, and get someone to place the correct identifying label on each them, and they'll be able to do it with ease, even if they've never seen or used an iPad in their lives. Repeat the task with the Surface models and I can guarantee the success rate will be far, far lower.

The Fatal Flaw

Matt Rosoff, Editorial Director of the IDG property CITEworld, was an analyst for ten years at Directions on Microsoft, and doesn't see the Redmond tech giant winning any battles against Apple anytime soon. In fact his vision for Surface 2 is one of doom and gloom. As he told me yesterday, "The original Surface did not fail because of bad hardware. It failed because of an unclear use case and a lack of apps. So in order for the Surface 2 to succeed against the iPad, it must be significantly better or cheaper. It's not. The fatal flaw of Surface RT and Surface 2 is that they run Windows RT, which means they can't run any traditional Windows programs. Microsoft's sales pitch for Surface is that it comes with Office, but people who really need Office tend to work on a laptop anyway, and getting a full Windows 8.1 laptop or Surface Pro 2 offers the flexibility of running traditional Windows software".

So in other words, Matt feels two of the three products in the Surface line have limited appeal to consumers, and as much as I like Microsoft's slates I have to agree.

More Bad News

Amid all the new products, Apple yesterday announced it was bundling iWork (and iLife) for free on the new iPad. So now the world's bestselling tablet comes with a productivity suite of its own. "It's a smart move on Apple's part", Rosoff told me. "It undercuts one of the main differentiators of Surface 2 -- the bundled Office apps".

Yes, iWork might not be Office, but it has a pretty decent set of applications that have been specially retooled for that operating system and will likely be fine for most people's needs. Office hasn't been updated to properly suit a tablet environment yet and, when it is, Steve Ballmer himself has said a version of Office will be coming to the iPad eventually -- inevitably -- anyway.

While the inclusion of iWork on the new devices was likely a response to Office on Surface, it's not Microsoft's tablets Apple cares about. "It's important that Apple keep refreshing the product line, but that's more to keep the iPad relevant against the influx of Android tablets", Rosoff says.

Does he think the iPad Air will have an impact on the new Surface sales? "No. I think the Surface 2 would have struggled against the iPad even if Apple had not refreshed the product line. The Surface 2 has solid hardware, but the app ecosystem is nowhere close to Apple's".

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