DigiTimes says, based on supply chain reports, that Microsoft is planning to cancel the Surface Pro 3 tablet. Cited were poor expected sales, “unlikely to surpass one millon units,” and Microsoft's unaggressive pursuit of a next-generation model. Here's what I'm thinking about all that.
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Rumors are rumors. When it comes to Apple, it's always advisable to take these supply chain reports with a grain of salt. We have learned that when a company changes suppliers, the old supplier may grouse for a bit, and what looks like a cancelled product is merely being assigned to a new supplier. Or, Microsoft may be radically rethinking the Surface tablet, and the current supply chain may be clueless.
Notable is that right after this report came out from DigiTimes, Microsoft responded immediately. The reaction from Microsoft looks pretty strong in light of the fact that the company seldom comments on rumors. However….
The Logic of the Situation
If the Surface Tablet were doing moderately well, I'd dismiss this rumor. However, there are some facts that bear on the possible validity of the DigiTimes report.
- Microsoft has a new CEO, Satya Nadella, with his own new vision.
- The Surface tablet has had terrible sales, perhaps a few million. Apple has sold over 200 million iPads.
- The Surface tablet has racked up billions of dollars in losses.
- If Microsoft were planning to cancel this product, they have plenty of unsold inventory to assist with meeting obligations to commercial partners until they work out an exit strategy. Meanwhile, keep a stiff upper lip and sell it with vigor. Everything's good to go until it isn't.
- Microsoft has had some difficulties in the past with other mobile hardware.
- Many of the industry's technical editors have surmised that Microsoft cannot win, indeed, cannot even survive the tablet war. I have also been in that camp: “Microsoft’s Sobering Realization: It Can Never Win, Place or Show in the Hardware War “
When companies invest heavily in a product that isn't received favorably, there's a period of time when they do everything that they can to turn the situation around. Intense pressure is put on sales vice presidents to perform. Small pockets of success can lead to false optimism. Finally the day comes when it's time for a CEO command decision: cut the losses and more seriously examine the company's vision and strengths.
I'm not proposing that the demise of the Surface is imminent. Supply chain rumors are often just plain off base. But this one is particularly intriguing, given the facts cited above, and the thought continues to linger in my mind that trying to sell this Surface tablet is an uphill battle and isn't one of Microsoft's core strengths.
Microsoft's vision has always been software that helps us get our work done on our popular hardware of choice. I think that's where Mr. Nadella is eventually headed.