dim light of a New York event space, a video announcing
the newest version of the Microsoft Surface laptop was
playing loudly, projected on a huge screen to a crowd of
analysts and media. Surface chief Panos Panay was hardly
paying attention, instead roaming through the audience,
inspecting the various Surface devices being used by
scattered audience members.
Microsoft’s chief product officer, picked up a few of
the devices, taking a quick look at cases and
accessories and noting the product models.
Surface line of devices — ranging from hybrid tablets
to laptops to massive touch-screen whiteboards, and the
only major hardware line made by Microsoft besides the
Xbox gaming console and HoloLens augmented reality
headset — has been Panay’s daily work for more than
six years, and he was intent to learn how each person
uses theirs, from the teacher in the audience to the
inspired by products and people, but the collection of
people coming together is super emotional for me,” he
said at the early October event as Microsoft announced
small evolutions of the line — new versions of a few
Surface products, and a pair of Surface headphones.
got off to a rocky start at Microsoft after its 2012
launch, but it has survived while another hardware
effort that started around the same time — a Windows
phone — fizzled. Microsoft has continued to invest in
the Surface hardware — linking its development closer
to its software efforts — and gradually Surface sales
have increased, especially in the last year, with the
line carving out more space for itself among leading PC
October event, Panay was undeniably excited about the
new models, which he said took into account huge numbers
of suggestions from customers. He also acknowledged that
the Surface trajectory has not always been smooth. In
the line’s second year, Microsoft took a $900 million
charge related to the early Surface RT, and the tablets
are consistently outsold by big competitors Apple,
Amazon and Samsung.
Surface revenue has also increased steadily for the past
five quarters and Microsoft, even though it has
transformed itself into a business increasingly focused
on cloud-computing technology, remains committed to the
hardware line. Chief executive Satya Nadella has thrown
his support behind the Surface hardware, just as he did
with Microsoft’s Xbox division, even when some critics
reason for that commitment to Surface, some analysts
say, is that the devices allow Microsoft to present a
premiere version of its software and hardware in one.
The company can showcase everything from its own
operating system and workplace software on its own
hardware, something it can’t completely control when
it licenses its software to other device makers.
a vehicle to provide a best-in-class experience with
Windows 10,” said Wes Miller, an analyst with
Directions on Microsoft. “It’s trying to treat the
hardware and software as an experience.”
allows for new services such as Microsoft Managed
Desktop, which gives companies Surface devices preloaded
with Microsoft 365 and access to an IT help desk. It’s
designed to make it easy for companies to buy (or in
this case, lease) devices and keep them secure. It also
encourages workers to use and stay on Microsoft’s
this broader strategy that’s not just about this
device,” said Forrester analyst Andrew Hewitt.
same time, he said, Surface devices have started to take
over some of the tablet market from Microsoft’s
report from research firm IDC shows Microsoft has yet to
break into the top five tablet makers by market share,
remaining behind Apple, Samsung, Huawei, Lenovo and
Amazon. But if the hybrid devices are viewed more as
laptops, especially since they come with keyboards,
Microsoft edges its way into the top five.
to Gartner’s latest estimates for U.S.
personal-computer sales — which include hybrids like
the Surface devices as well as laptops and desktops, but
not the popular iPads or Chromebooks which fall into a
different tablet category — Microsoft sold 602,000
units during the third quarter, making up 4 percent of
reported that its Surface sales during the quarter ended
Sept. 30 increased 14 percent from a year ago. That
follows a company report this summer that Surface sales
increased 16 percent, or $625 million, during its last
fiscal year. That would come to annual sales of about
$4.5 billion, though Microsoft does not break out
specific Surface sales numbers.
numbers underscore how Surface has changed over the past
beginning, Panay said, the Surface development team was
creating hardware to wrap around Windows 8 software that
had already been developed.
wasn’t about the company coming together, it was about
making hardware for stuff the company had already
built,” Panay said.
changed under Nadella, who took the helm in 2014 and has
become known for breaking down some of the traditional
silos within the business. Now the company leadership
comes together to consider how Surface fits in to
Microsoft’s overall strategy, Panay said.
about senior leaders coming across the company and
believing in and building one product,” he said.
outside tech CEO cast doubt last year that the Surface
line would still be around by the end of 2019, saying
Microsoft would instead narrow its focus to cloud
computing and software.
others disagree. It may not be the market leader, but
the Surface hardware line, and especially the hybrid
tablets, are changing the way people use PCs in an
increasingly mobile society.
market has been constantly challenged and it’s been
pretty cutthroat for a while,” Miller, the analyst,
said. “I think what Microsoft is trying to do is to
give you an experience that they know is consistent and