Microsoft Surface – Hedged bets

Durable folding screens would take Surface to a new level.

• Microsoft has launched two brand new form factors (and use cases) but I think it is not releasing them until next year just in case flexible screens can reach a level of acceptable durability.
• Apart from incremental updates to its iconic and successful surface line of products, Microsoft launched an ARM-powered surface, broadened its silicon sourcing to AMD and launched two folding screen products.

Surface Neo & Duo.

• The surprise of the event was the actualisation of the long-rumoured Surface phone but not in the way that many expected.
• The Surface Duo is a dual-screen Android device that has been optimised to work with two 5.6” screens.
• The advantage of running Android will be the apps that will be available as well as the device being a credible smartphone.
• The downside is that it will be running stripped-down versions of Office, meaning that its productivity will have been compromised from a content creator perspective.
• The Surface Neo is a larger variant with two 9” screens but this one runs a new variant of Windows called Windows 10X (Intel) which is optimised for dual-screen devices.
• These are folding devices but with two screens which at a very high level is not new and has been tried before.
• So why is Microsoft waiting a year before these devices are ready for market?
• There are two reasons that I can see.
  • First, folding screens: are just making their way onto the market and they have already been proven to be far too delicate for the mainstream.
  • The industry is already working on the next generation of folding screens and should they prove to be durable enough, I suspect that Microsoft will switch from a dual set up to one large folding screen.
  • This is a long-shot but it would make these devices far more appealing than they already are.
  • Second, developers: In order to make the most of the dual-screen and multiple form factor orientations that are possible, apps will need to be modified.
  • Microsoft is showing the devices now and making the APIs available such that developers have time to tweak their apps so that they run optimally on this new form factor.
  • This will greatly help increase the appeal of the device but as ever there is the volume question.
  • Microsoft had great difficulty in getting developers to write for Windows Phone and the volume that this achieved at its peak was far greater than these are ever likely to achieve.
  • Hence, getting developers on board is likely to be difficult.
• These two devices are beautifully designed, incredibly thin and a great deal of thought has gone into the use case but they would be even more impressive with durable folding displays.
• This is the option I think Microsoft is keeping open.

Surface Pro X

• This is a new form factor with much smaller bezels and 5.3mm thin form factor that is powered by a custom Qualcomm Snapdragon processor.
• It has LTE built-in as well as a very powerful graphics processor which will help to take a lot or processing requirement off the CPU which will greatly help the underlying performance.
• This has a great innovation with a small pen that fits into the touch cover where it also will charge.
• Removing the pen also invokes the apps that the user wishes to use with the pen.
• The issue, of course, is that it is Windows on ARM.
• This gives a great form factor and battery life, but it means that not all apps are going to work with it.
• Until this issue is fundamentally solved, I think Windows on ARM will struggle to carve out a meaningful niche in the content creation computing segment.

Incremental updates

• Microsoft also launched Surface Pro 7, Windows Laptop 3 as well as a 15” version of this product.
• These are incremental updates to its existing line keeping it ahead of the competition and, as such, are worthy updates.
• Microsoft also launched the hideous looking Surface earbuds that surprisingly do not invoke any digital assistant and come at a very high price of $249.
• This further confirms Cortana’s demise and I am not sure that users will be willing to pay the higher price for the transcription function that comes with these devices.
• Given that Microsoft and Amazon are collaborating in this area, I am surprised that one cannot evoke Alexa from these earbuds especially when everyone else’s can.

Take-Home Message.

• The folding devices are a very interesting place to take productivity and I think that the thought that has gone into how these devices can be used will make them pretty compelling when they go on sale.
• What would make them a must-have would be an upgrade to a single folding display assuming that the display industry can get the durability issues sorted out.
• The net result was a good day for Microsoft cementing its position as the lead innovator in the personal computing productivity space with more to come.
• That being said, the stock has been a stellar performer and it is no longer the value stock that it was some years ago.
• For that reason, I would not be against taking some money off the table.