Microsoft Surface Tablet

I felt that I should add my 2 cents to the discussion about Microsoft’s Surface Tablet. I think it’s promising, and if anything should spur some competition. Hopefully. Otherwise I wouldn’t hold my breath. I remember when Windows 7 was so long delayed that I ended up not caring, and just enduring Windows Vista. 

Other people much smarter than me have had their own opinions about the Surface tablet. The Apple fanboy in me can’t resist linking to John Gruber – Surface: Between A Rock And A Hard Place

The thing I liked most about his article was this excerpt from Horace Dediu:

If we simply divide revenues by PCs sold we get about $55 Windows revenues per PC and $68 of Office revenues per PC sold. The total income for Microsoft per PC sold is therefore about $123. If we divide operating income by PCs as well we get $35 per Windows license and $43 per Office license. That’s a total of $78 of operating profit per PC.

Now let’s think about a post-PC future exemplified by the iPad. Apple sells the iPad with a nearly 33% margin but at a higher average price than Microsoft’s software bundle. Apple gives away the software (and apps are very cheap) but it still gains $195 in operating profit per iPad sold.

Fine, you say, but Microsoft make up for it in volume. Well, that’s a problem. The tablet volumes are expanding very quickly and are on track to overtake traditional PCs while traditional PCs are likely to be disrupted and decline.

So Microsoft faces a dilemma. Their business model of expensive software on cheap hardware is not sustainable. The future is nearly free software integrated into moderately priced hardware.

And in those 4 paragraphs lies the explanation on why Microsoft released it’s own tablet. And if their main motivation is $$$ I’m not convinced that they’ll do a good job at it. Anyway, I’m looking forward to being proven wrong 🙂

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