Microsoft Surfaces Compelling New Devices

on October 6, 2015

Today, Microsoft launched its revamped device line. Since taking over the reins at Microsoft, Satya Nadella has focused on developing a class of devices that shows off the strength of its brand and underlying Windows 10 OS. Under the device division leadership of Panos Panay, Microsoft is well on the way to achieving that vision and moving the bar from being just a provider to a premium brand.

Today it launched the next generation Fitness Band, two new Lumia mobile smartphones, showed next generation HoloLens capabilities, announced a revamped Surface Pro, and previewed a brand new Surface Book 2-in-1 laptop replacement.

Microsoft has hit a home run with their devices this time around. Attacking the high end of the market with “halo devices”, it is establishing a position for “best in class” products and related services. Microsoft Band is not another “me too” fitness band and has the price to prove it ($249). The Microsoft Lumia phones with groundbreaking features/performance will appeal to business users (especially with Continuum smart docking capabilities through the Display Dock). The update to Surface Pro shows a continuation of Microsoft trying to push the limits in form, functionality and innovation, and the improvements in processing power, battery life, screen resolution and keyboard/pen will be compelling to the higher end, primarily tablet-oriented users. The newly introduced Surface Book may actually be the most compelling of the products launched. It re-imagines what a laptop can be, with an innovative accessory GPU that enables engineering tasks and gaming previously unimaginable in a thin/light form factor with impressive 12-hour battery life.

These announcements will shake up the market. Although everyone likes to point to Apple as being the best tech innovator, I think, after today’s announcements, the new crown needs to go to Microsoft in the markets it has identified as being critical (no doubt I will get many arguments against this position). In my opinion, Microsoft is taking the battle directly to Apple’s doorstep and has thrown down the gauntlet to say you’re not the only innovator out there. Frankly, Microsoft has left Google in the dust (although no doubt Google has the means and the will to catch up, with its new phone and tablet devices a good first step).

Microsoft’s market strategy is right on. Instead of being a volume player in a cut-throat market (e.g., tablets, phones, laptops) with minimal margins, it has chosen to reinvent those markets in its own image. Although Intel “invented” the 2-in-1 class of notebooks (along with Ultrabooks), the market has been slow to take off, mainly due to a lack of true innovation and too high a price for what users’ received. Microsoft introduced the revolutionary Surface Pro to demonstrate what could be done with some forward thinking and engineering of out-of-the-box products and the 2-in-1 market has doubled in the past year alone. With Windows 10 now hitting its stride to actually showcase what these devices can do (Windows 8 was a poor performer and a hard to use product that few liked), the market should become even more robust.

Microsoft is not trying to compete directly with its customers in general purpose hardware but it is serving notice to traditional OEMs (e.g., Dell, HP, Lenovo) that, if they won’t innovate and drive the market in the direction Microsoft wants it to go, Microsoft will. These new products are literally a kick in the butt to OEMs to start innovating. Microsoft certainly has no interest in putting them out of business and competing at the low to mid tier, but Microsoft has correctly seen a lack of understanding that there is a compelling need for higher end devices (the equivalent of Lexus or Mercedes in cars) that isn’t being adequately served, especially in the high end of the business market. It is this area where Microsoft is squarely targeting its devices and where it will be successful.

Make no mistake, MSFT could not have pulled off 30% more power, 12-hour battery life and twice the performance of a MacBook Pro in its new Surface Book without the 6th generation Intel core chips and the Nvidia GeForce GPU built into the Surface Books. Microsoft is saying this is what 2-in-1s should have been all along, and here is the products to prove it can be done. The price of the Surface Pro (starting at $899) and Surface Book (starting at $1499) puts them in the premium range, but the Surface Book does for the moribund laptop market what Tesla did for cars. With high end 8 and 6 core Qualcomm Snapdragon chips in its Lumia phones, Microsoft is saying processing power is important and price should not be a reason to make underpowered, low-performance devices.

I expect the new devices to be very popular with the high-end buyers who look for form, fit and function above price. While this is a relatively small portion of the overall market, it is the same “luxury goods” market other product segments have gone after for years and that has not been well served by the computer industry fixated on volume at all cost. Apple has known this for some time with a selected, targeted attack on the higher end consumer with its products (then ultimately letting the higher end products trickle down to the mid-priced range). Microsoft has now awakened a higher end market that is not locked into Apple’s ecosystem, with users willing to either switch, or who already have a preference for Windows but were waiting for compelling products to urge them into action.

Microsoft knows that, instead of imitating Apple as it tried to do in the past, its focus must be on differentiating. Attack them if you will, but there are still many Windows users out there who have no intention of switching. Microsoft is determined to keep them.