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Alexis Kleinman   |   September 10, 2015    9:06 AM ET

On Wednesday, Apple announced an updated iPad, called the iPad Pro. Along with a major increase in size, there are a few additions that will likely be familiar to Microsoft fans. Specifically, Apple showed off the new Smart Keyboard, which looks strikingly similar to the keyboard on Microsoft's tablet, the Surface.

Here's the iPad Pro with Apple's new Smart Keyboard:

And here's the Microsoft Surface:

They look similar. The Surface debuted with this cover-keyboard combination in 2012. Three years later, Apple is seemingly copying its style with both a similar cover-keyboard and a stylus

Back when the Surface debuted to much derision in 2012, cartoonist and writer Joel Watson drew an incredibly prescient comic, predicting Apple's latest move (the comic contains adult language):

Incredible, right? Watson completely predicted Wednesday's event. Don't take the comic the wrong way, though. "It’s funny to me how many people think that comic is bashing Apple," Watson told The Huffington Post via email. "I only use Apple products, and made the comic on a Mac. It’s more about how Apple isn’t necessarily a better tech company than MS or Google, but they get the most credit from users and the media for innovation." 

Watson makes online comics at and, and is a writer and voice actor for Cyanide & Happiness.  

"Apple is a style brand that happens to make great products, and they’re better than most tech companies at repackaging and polishing existing tech and selling it as a complete experience," Watson said. "The idea that Microsoft or Google would be stamping their feet saying, 'But we… we just… we already did… and nobody even…GAH!' is hilarious to me. It has to be frustrating for every company that isn’t Apple. Apple is that kid in school that effortlessly exudes cool, and MS/Android are the smart, unpopular kids that Apple convinces to do its homework."

He's got a point.  

Damon Beres   |   April 30, 2015    2:06 PM ET

Microsoft wants its new Windows 10 operating system on "1 billion devices."

That's what Terry Myerson, Microsoft's vice president of operating systems, said at the company's Build conference Wednesday. Microsoft just might get there, since it'll offer Windows 10 as a free upgrade in the first year. If the company has its way, Windows 10 will be on almost every device imaginable.

While the event was far from the first preview of Windows 10 we've seen -- Microsoft announced the OS last September -- it may have been the boldest declaration yet of the company's intent to put the platform on any device that could possibly run it.

Microsoft wants users to believe they'll get a complete Windows 10 experience on any device. (Source)

Seriously: Windows 10 could be everywhere you look. According to CNET's Carrie Mihalcik and Nick Statt, "Developers will write to a single code base, allowing them to create so-called universal apps that work on any device so long as that device runs Windows 10, including phones, tablets, PCs, the Xbox One game console, TVs, ATMs and even the new HoloLens virtual-reality headset."

Part of the strategy announced Wednesday are new tools that will allow app developers to easily convert Android and iOS apps to Windows programs. These Windows apps are intended to run across all devices -- including the HoloLens, Microsoft's upcoming virtual reality headset, which was also demoed Wednesday.

Microsoft's HoloLens device will bring Windows 10 to the world around you. (Source)

To mark the occasion, Microsoft released a new preview build of Windows 10 Wednesday. Interested parties can sign up for the Windows Insider Program and test out the new operating system before its official release later this year. Fair warning: It's a bit technical to set up.

Various forms of Windows -- mostly Windows 7 -- remain by far the most popular operating systems on desktop computers worldwide. But Apple's Mac OS X has been on the rise recently, and Windows Phone is a distant third to Android and iOS in the smartphone marketplace.

  |   January 21, 2015    2:17 PM ET

(Adds background on financial effect)

By Bill Rigby

SEATTLE, Jan 21 (Reuters) - Microsoft Corp will give away its upcoming Windows 10 operating system as a free upgrade to users of the most recent versions of Windows and Windows Phone, as the world's largest software company tries to retain customers in the mobile era.

The 'free' strategy is a calculated gamble for Microsoft, designed to put Windows in as many devices as possible. The company would then make up for any lost revenue by selling services such as Office over the Internet, or cloud.

"It's a necessary evil as CEO Satya Nadella and Microsoft have recognized the 'golden goose' and major revenue opportunities will happen after the upgrades have taken place," said Daniel Ives, an analyst at FBR Capital Markets.

"Microsoft needs to lay seeds for its cloud-centric strategy and Windows 10 is the epicenter of that strategy. It's all about making it attractive for the ecosystem to upgrade onto this next-generation platform."

The immediate revenue hit is unlikely to be large, as Microsoft gets no more than $500 million of its $20 billion or so annual Windows revenue from upgrades, analysts said. The vast majority of Windows revenue comes from hardware makers installing it on new personal computers and businesses paying for multi-year licenses.

Investors were not impressed. Microsoft shares fell 1 percent to $45.91 on Nasdaq shortly before the close.

The company is expected to say more about the financial effects of the new approach when it reports quarterly earnings next week.

Windows 10, expected on the market this autumn, will be available for one year as a free upgrade to users of Windows 7, Windows 8.1 and Windows Phone 8.1, Myerson said.

Industry and Wall Street analysts described the move as inevitable.

Windows only features on roughly 15 percent of computing devices including phones and tablets, and is largely irrelevant for many consumers. It lags Apple Inc and Google Inc , which regularly update their software systems free for customers.

"The way to motivate consumers is to make upgrades transparent and painless - meaning free and low-to-no effort," said Forrester analyst Frank Gillett. "Microsoft had to match the expectation set by the mobile and Web leaders."

At an event at its headquarters near Seattle, Microsoft also tried to burnish its flagging reputation for innovation.

Unexpectedly, it unveiled a holographic lens device that allows users to see three-dimensional renderings of computer-generated images. Microsoft HoloLens, which looks like a wireless visor, raises the stakes in the emerging market for virtual and augmented reality, being targeted by Facebook Inc's Oculus and Google's Glass project.

The device will be available around the same time as Windows 10 this autumn, a Microsoft executive said.

Executives also showed off an Xbox app for games on Windows 10 and a new version of its browser code named 'Spartan,' which lets users make notes on Web pages and share them.

Microsoft announced its new Windows 10 operating system in September, billing it as a move to unify all kinds of device users. It skipped Windows 9 altogether, to put some distance between the new system and Windows 8, which confused many users by ditching the start button menu and using a new layout. (Reporting by Bill Rigby; Editing by Jeffrey Benkoe, Andre Grenon and Richard Chang)

Holiday Gifts for Girl Geeks

Sherrie Nachman   |   November 21, 2014    9:59 AM ET

While there may be a dearth of women in Silicon Valley's C-suite, there is no shortage of women who love high-tech gadgets. To keep those women filled with joy this holiday season, check out these innovative gift ideas for girl geeks. Of course, geeky guys may like them too.


Getting to sleep can be challenging for those who can't say goodnight to their devices. The perfect gift for those whose circadian rhythms could use a little help is a sleep bracelet from Philip Stein. The bracelet uses natural frequency technology to help us dream sweetly. Wear it nightly and get some rest this holiday season, and beyond. (, $395).

Struggling with a giant Thanksgiving turkey or a small candy recipe? Foodies will love iDevice's kitchen thermometer. While it can't cook dinner for you, it will tell your phone when your food has reached the perfect temperature and is ready to serve. Although the two probes may be reminiscent of Frankenstein, they allow cooks to keep track of two meals at once. (, $79.99).

Holidays are filled with memorable photo ops. Why not give those boring selfies a break and get a more sophisticated picture experience with Motrr's Galileo. This handy docking station lets users take 360 degree panorama shots, time lapse photos and can even track movement. And if you are not home, you can control the device from your computer and still get a perfect shot of Santa sliding down the chimney. (, $149).

Microsoft's Surface Pro 3 is another cool gift with multiple unusual functions. My favorite is the pen's ability to take a screenshot of any web page with just one click. Users can then mark up web pages, pictures and documents and share them with friends and colleagues. Casual writers will love OneNote, the device's super easy way to write anything from lists to a novel. ( $799).

Every woman needs to look amazing before she can tackle those fabulous holiday parties. One of the most advanced (and fun) mirrors on the market is the Simple Human sensor mirror. This high tech make up mirror lights up when you approach it, and then turns itself off when you walk away. The mirror also simulates natural sunlight, is cordless, and is powered by an environmentally friendly LED bulb. (, $200).

Happy Holidays!

Microsoft's 4 Biggest Problems

Jonathan Rettinger   |   August 1, 2014    9:02 PM ET

Where is Microsoft headed in the next three to five years? Will it continue to slog along, as it has been for the past several years, riding its PC legacy and expanding its footing in the cloud, while its market is increasingly defined by business users instead of consumers?

With Satya Nadella now at the wheel, it's clear that Microsoft is looking for a new direction. Nadella has famously said that the company is shifting to a "mobile-first, cloud-first" mentality, although so far the company only seems to be making headway in the latter.

To better understand where Microsoft is headed, it's important to look at the main problems it faces.


Microsoft's biggest, most glaring shortcoming is. of course, the fact that it hasn't yet figured out how to gain a foothold in the mobile market. At the present time, Microsoft's mobile market share amounts to just 3.5 percent. That's a dismal number, especially compared with Apple's 14.8 percent and Google/Android's 80.2 percent. Additionally, its Surface tablet has only been able to garner less than 3 percent of the tablet market. This makes Windows the only major operating system that doesn't have a viable mobile component. Why does this matter? As personal habits have shifted to a mobile-computing model, this is where the money is. About 53 percent of Apple's revenues last quarter came from iPhone sales. In general, the desktop and laptop markets have been in decline, as consumers are relying more on tablets. This doesn't mean laptops and desktops are being eliminated, but it does mean that a household that once would have bought two laptops now buys just one and uses a tablet for the second device. But there's also another reason that this is important: Having a strong mobile arm is important for keeping consumers within a brand's ecosystem. If I own a Microsoft PC but buy an iPhone, I'm more likely to buy an iPad over a Windows 8 tablet, and eventually, when it's time to buy a new laptop or desktop (assuming I don't just use a tablet instead), I'm also more at risk of leaving Windows to go with a Mac. Additionally, if I buy an Android phone or a Nexus tablet, I'm also more likely to try Google's ecosystem in other ways, like trying its Office rival product, Google Drive. Because Microsoft doesn't have a viable mobile platform, consumers must go elsewhere, to Apple or Google, and once they do, they're more likely to stay there.

There is one potential bright spot here for Microsoft. A new report by Gartner found that one of the fastest-growing devices today is the "premium ultramobile category," which consists mostly of the MacBook Air and Microsoft's Surface Pro -- although high-end ultrabooks by Lenovo, Dell, HP and Acer are also in this category. The research firm is forecasting premium ultramobile devices to grow by 50 percent this year and 70 percent next year. And by the end of 2015, 80 percent of all premium ultramobile devices on the market will be Microsoft's.

What should Microsoft do? Personally, I think Windows 8 is a solid platform, and the Nokia hardware itself is also excellent, so the problem isn't with the quality of its products; it's with getting people to take a chance on them. How does Microsoft do this? Cut prices on its mobile line, across the board. If Microsoft could offer deep discounts on smartphones and tablets on a par with Google and Amazon, they will gain traction in the marketplace. They could also leverage Office and Xbox to increase the value add for these devices; after all, a tablet or phone that offered free Office 365 or free Xbox game titles would be a real draw for consumers.


Another problem for Microsoft is that its ecosystem isn't standing up to the competition. Of course, Office 365 is the exception to this -- and it's a huge one, no doubt. But its Windows Store is about one-fifth the size of the App Store and Google Play, it doesn't have a viable rival to iTunes (unless you count Xbox Music), Google's Chrome browser surpassed Internet Explorer in total market share for the first time this month (and IE has lost roughly 50 percentage points since 2008), Bing remains a distant second to Google Search (18.7 percent versus 67.6 percent, respectively), and Microsoft only recently released a free online version of Office -- Microsoft Office Online -- in response to Google Drive. Having a robust ecosystem is critical to retaining customers and growing device sales, and Microsoft clearly has a long way to go here. On the bright side, gained the same number of users as Gmail within a few months of launching last year, and it remains popular. Its Office Online product has also been highly rated.

What should Microsoft do? Microsoft has to get more apps in its store, but it's a chicken-and-egg kind of problem: Developers don't want to build apps that there isn't demand for, and consumers don't want a phone that doesn't come with all their favorite apps. Microsoft has to find a way to incentivize developers. It could do so by paying app developers outright, offering higher margins on sales and offering consumers significant credit toward app purchases. Of course, by slashing prices on its mobile line to generate more sales, it will solve this problem more directly.

Market Disconnect

Is Microsoft out of touch with consumers? Over the past few years Microsoft has seen its influence waning, and it's also made a number of key mistakes. For instance, the company waited almost three and a half years after the first iPhone debuted before launching its own modern smartphone operating system, Windows Phone 7 (which failed miserably); it took two years to launch its first tablet after the iPad; it went all in with a new operating system for PCs as well as mobile, Windows 8, which uses a metro-tile interface that is best used with a touchscreen device, not a standard mouse and keyboard, as most consumers have; its latest iteration of the Xbox game console was positioned as an all-in-one entertainment unit for the living room instead of as a pure gaming device, was priced $100 higher than the PlayStation 4 and required a $60-per-year membership fee just to be able to use Netflix, Hulu and other apps; etc. Its product pricing continues to be out of step with consumers, as it's overpriced several key products -- Xbox One, Surface, Windows Phone and Office -- and then had to slash prices later.

What should Microsoft do? Again, a better pricing strategy is what's needed most of all. Microsoft has to stop taking the premium-model approach with many of its products -- phones, tablets, laptops, Xbox. Microsoft also needs to stop pushing the Windows 8 metro-tile interface as a universal solution for its mobile devices, laptops and PCs. On a mobile device it makes sense, but for traditional computers it's just not what consumers want right now.

Manufacturer Partnerships

One of the reasons that Microsoft came to dominate the PC market was that it licensed the Windows operating system to a wide array of third-party manufacturers like HP, Dell, Samsung, Lenovo, Acer, Asus, etc., which all flooded the market with cheap products. These are the same manufacturers that today are producing Windows 8 laptops, ultrabooks and tablets. Without this large group of manufacturers behind it, Microsoft would face even greater competition in the markets that matter. But it's a mixed blessing: With this entanglement of third-party companies, Microsoft doesn't have the ability to control the design, style, features, marketing and pricing of the majority of its Windows products. Microsoft has tried to overcome this by buying Nokia and producing its own branded tablet, the Surface, but in so doing it's run the risk of alienating its tablet partners, and, as a result, the Surface has always been priced considerably higher than third-party Windows 8 tablets. Overall, Microsoft's manufacturer partnerships are a net positive for the company, but this lack of control over its products makes it harder to control the brand and innovate with new features and designs.

What should Microsoft do? This is one area where there's not much that Microsoft can do. Its manufacturer partnerships are simply too important to risk. The company should discontinue its Surface line and focus instead on the Surface Pro, where it can charge a premium and the market is growing fast, and on the Nokia handsets, where it doesn't face as much partner competition.

Microsoft Surface Pro 3 Review

Shelly Palmer   |   July 14, 2014    4:47 PM ET

Microsoft Surface Pro 3

Will Microsoft's Surface Pro 3 replace your laptop? That's the million-dollar question. Microsoft says it absolutely can -- and it's right.

The Surface Pro 3 is Microsoft's newest tablet. The device has a bigger screen than its predecessors (12"), is more powerful and comes with better accessories. All in all, there are five models, ranging in storage (64 GB to 512 GB), power (Intel i3, i5 and i7 Processors) and price ($799 to $1,949).

If you really want to replace a laptop, you're looking at any of the four best models (which start at $999). At these levels, the insides of the Surface Pro 3 are essentially the same as what's inside a MacBook Air. For all practical purposes, the Surface Pro 3 is simply a laptop with a detachable keyboard.

For $129.95, the optional plastic keyboard has a touchpad that's pretty tactile and keys that actually click. This is a keyboard you can really touch-type on as opposed to the horrible plastic mess that Microsoft rolled out with the first generation Surface tablets.

Power Excel Users Rejoice

For Windows users, the Surface Pro 3 has only one important feature -- it will run 100 percent of your Windows programs. Specifically, it will run 100 percent pure Microsoft Office. Where does this matter? Anywhere you need keyboard shortcuts such as Excel power users. If you use extensive Excel keyboard shortcuts, you know that the version of Excel that runs on OS X is useless. If you own a MacBook Air and you run Windows over Parallels, you know that MacBook Air keyboard does not allow most power Excel keyboard shortcuts - Mac keyboards simply don't offer the key combinations. The same is true for the glass keyboards on iOS and Android devices. However, the Surface Pro 3 is a 100 percent Windows machine and when you run Excel you will be in keyboard shortcut, power user heaven.

Of course, the Surface Pro 3 also runs everything else you can run on a Wintel machine including the full Office Suite, Adobe Creative Suite and even Pro Tools (digital audio workstation) and Avid (digital video workstation) software. I loaded up my demo unit with all kinds of random Windows programs and they all ran perfectly.

Microsoft's Surface Pro 3 Hinge

Standout Features

Microsoft is quite excited about the hinge on the back of the Surface. When the product manager demonstrated the device to me, he spent about 10 minutes raving about the hinge - it's got a sort of "infinite flexibility." With it, you can turn the device upside down, you can stand it up... you can prop it just about any way you can think of... who could ask for more?

Microsoft's Surface Pro 3 Pen

One of the true hero features of the Surface Pro 3 is the "pen." It's far more than just a stylus. The pen has two buttons: an eraser and a selector. When you click the top of the pen, you immediately get into Microsoft OneNote -- even if the device is locked. The pen is particularly excellent and it transforms OneNote into something special. If OneNote is a tool you like to use, you are really going to love the way it's integrated into the Surface Pro 3.

Windows 8.1 -- Love It or Hate It?

Tablets require touchscreen interfaces. Laptops require keyboard interfaces. The Surface Pro 3 offers both. You may have heard that Windows 8 sucks. I've heard that too (and said it a few times). Windows 8.1 sucks less. Would I like if it could be set to default to a Windows 7ish home screen devoid of the seemingly useless tile icons? Perhaps. But after using it for a while, you will come to appreciate how much care and thought went into the new interface and, as soon as you start mixing keyboard, touchpad and touchscreen user interface behaviors, you're going to understand why there is no reason in the world to look backwards. Windows 8.1 may not be what you think you want in an operating system - but it's an important step towards a touch-sensitive future.

Who is the Surface Pro 3 For?

Students and professionals who really want to have the best of both worlds will really like the Surface Pro 3. If you like using a tablet for reading and Skype and browsing the Internet, but also need to really get work done, as Microsoft boasts, "This is the tablet that will replace your laptop."

The i5 models ($999 for 128 GB or $1,299 for 256 GB) are good devices. The all-singing, all-dancing i7 models ($1,549 for 256 GB or $1,949 for 512 GB) are great devices. The $799 model (an i3 with 128 GB of storage) isn't worth the money. The i5 models are available now, while the i3 and i7 models will start shipping on August 1.

If You Ask Me...

If I were buying one, I would only consider the i7 with 512 GB of storage for $1,949 because you will really need the storage and you can never have too much processing power. While $2,250 (including keyboard and tax) is really expensive, it is about as future-proof as you can make this purchase. Literally every other model will be obsolete the moment you get it home. 256 GB simply is not enough local storage for anyone. BTW: I would not purchase a MacBook Air with anything less than an i7 processor and 512 GB storage either. There's no point.

Final Thoughts

This is the tablet everyone wanted before Apple invented iPads. It's a "real" computer in a tablet form. It has a USB port, it has a stylus, it's powerful, it can run "real" software. The problem Microsoft is going to have is that iPads have been invented and consumers have voted with their checkbooks. Hundreds of millions of iPad users have been trained to use apps instead of software. They are happy with single-purpose, easy to use, colorful tools that do simple things. Do you really want a full version of Microsoft Office on your tablet? Are you going to like the full version of Adobe Illustrator on a 12" touchscreen? Will the plastic keyboard comfortably replace your laptop keyboard? I say yes. But it's not up to me... it's up to you.

Great Tech Gifts For Dads & Grads

  |   June 2, 2014   10:12 AM ET

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Microsoft Wants You To Believe Its Tablet Isn't A Tablet

Timothy Stenovec   |   May 20, 2014    2:38 PM ET

Much of the focus with Microsoft's Surface, the software giant's family of tablets, has been on how it's fared against the iPad.

Spoiler alert: It hasn't done that well … at all.

On Tuesday, Microsoft made clear that it's shifted tactics. Now, the software giant is going after the Macbook. This won't be easy.

To a room full of tech reporters typing on MacBook Airs, Panos Panay, Microsoft's vice president in charge of Surface tablets, explained that the company's new Surface Pro 3 is a tablet that can also function as a laptop. The device's tagline is, after all, "The tablet that can replace your laptop."

"Tablets are designed for you to sit back and watch movies. They are designed to read books. They are made for browsing the web," Panay said. "Laptops are not designed that way at all. They are designed to help you get stuff done." The new Surface Pro 3, he said, is "everything in one package."

The base model Surface Pro 3 has a larger screen, and is thinner and weighs less than its predecessor. It starts at $799 and doesn't include a keyboard, which is available for $129. The top model comes in at a whopping $1,949 without accessories.

The 13-inch MacBook Air starts at $999. The computer is widely considered the best laptop out there.

In a display of showmanship, Panay highlighted the weight difference between a 13-inch MacBook Air (2.96 pounds) and a Surface Pro 3 without a keyboard (1.76 pounds) by placing them on a scale alongside one another.

The Surface Pro 3 has a 12-inch screen, and with the optional keyboard attached it comes in at 2.41 pounds. That's still lighter than a 13-inch MacBook Air, but heavier than an 11-inch Macbook Air.

Microsoft has not fared well in the tablet wars. The company was late to release its first tablet, which had a relatively high starting price and wasn't available in very many stores. Despite a refresh last fall, it's still had trouble making a dent in a category that has largely been dominated by Apple and Samsung. One analyst quoted in the Wall Street Journal estimated that Microsoft has taken as much as $2 billion in operating losses on the Surface.

Shipments of Surface tablets accounted for only 1.3 percent of all tablets shipped worldwide in the first three months of this year, according to data from IDC. Apple and Samsung together accounted for over 54 percent of tablets shipped last quarter.

Tablet growth has also begun to slow. Even Apple, the company that invented the category, is feeling the pinch, reporting less-than-stellar iPad sales last quarter.

Microsoft has taken the productivity laptop-meets-tablet tack with its previous Surface marketing. But now that the screen size is larger (12 inches over 10.7), and the device is lighter and comes with a much-improved stand that makes typing on it easier, it may have a better shot.

"This was a PC announcement, not a tablet announcement," said Ryan Reith, an analyst at market research firm IDC who covers tablets. "At the end of the day this can be used as a tablet, but it's a PC first."

The device's starting price places it at the high end of tablets in terms of cost, Reith noted.

"If you compare this to a tablet, you're going to say this is the most expensive tablet out there," he said. "If you compare it to other ultrabooks and the Macbook Air, it's going to win in a lot of categories, including price."

Microsoft spent much of Tuesday's event talking up the benefits for people whom Panay described as "mobile professionals" -- doctors, architects, screenwriters and others in creative fields.

Peter King, the director of tablet research at Strategy Analytics, said that although tablet growth is slowing, there's still opportunity to sell to large corporations and professionals.

"By introducing possibly a larger screened Surface fully integrated with Windows 8.1, with Office, they will be opening themselves to those legacy IT guys who are still pretty much controlling Windows empires within their organizations," King speculated before the announcement.

Growth in this category is delayed, King said, because unlike consumers who walk into a store and buy a tablet or PC, organizations can take up to a year and a half experimenting with devices and writing software before making a large-scale purchase.

"The sky isn't falling in the tablet market," King said. "It's not mature, it's not saturated by any stretch. We've got a lot of exploring to do to find where the best fit for a tablet is within organizations and even within the home."

Timothy Stenovec   |   January 24, 2014    8:18 AM ET

It sounds impressive: Microsoft in its latest quarter doubled sales of Surface -- the tablet it hoped would compete with the iPad -- and brought in twice as much revenue from the product as it did in the previous three-month period.

But the Redmond, Wash.-based company still managed to lose millions on its tablets.

In its earnings report on Thursday, Microsoft said it sold $893 million worth of Surface tablets in the three months that ended Dec. 31, up from $400 million in the previous quarter. That was more than the $853 million in Surface sales for Microsoft's entire fiscal 2013, which ended in June. But the company's "cost of revenue" -- what it cost to sell the tablets -- was a whopping $932 million in the latest period.

Microsoft just couldn't spark sales of the original Surface RT, the supposed "iPad Killer," after it launched in 2012. The software giant was way too late to the tablet game, Surface wasn't available at many stores, and with a starting price of $500, the product failed to gain traction. The company reported a $900 million charge last summer to reflect a $150 price cut on unsold Surface inventory, and has since slashed the price even more to make room for the second generation of Surface, which went on sale last fall.

(Microsoft seemed to learn from its Surface RT mistake and didn't ship enough of its second-generation Surface devices to keep stores stocked during the holiday shopping season.)

Over the past few months, Microsoft has been selling what was once a $500 tablet for as little as little as $199, less than the cost of its parts.

A "considerable amount" of Microsoft's Surface sales in its latest quarter could have been driven by the discontinued, heavily discounted tablets, Tim Coulling, a senior analyst at Canalys, a technology market research firm, said after Microsoft's earnings call with analysts and investors. "A significant portion of what was sold was sold at a loss."

Consumers seemed to respond to the price cut, at least: According to InfoScout, an analytics company, the Surface RT priced at $199 was the top-selling product at Best Buy on Black Friday. The Surface, as it's now called, is still being sold in Microsoft's online store with a starting price of $299. Microsoft didn't break down sales by Surface type, but in prepared remarks, Amy Hood, Microsoft's CFO, said the company "saw improved sales of Surface RT" in the latest quarter.

But Coulling said that selling older products at a loss is "unsustainable." He warned of dark days ahead, after Microsoft blows through its inventory of Surface tablets and consumers are forced to pay more for the Surface 2 and Surface Pro 2, which start at $449 and $899, respectively. (A Microsoft spokeswoman did not comment on whether the Surface RT is still being manufactured.)

It's a huge challenge, given that you can pick up a large-screened iPad for $399 and a handful of Android tablets for even less, Coulling said.

"Until they can reduce that price, they're always going to struggle against iPad and against the cheaper Android products," Coulling said. "They need to find a way of making their own Surface products cheaper, and also at the same time making Windows tablets that their partners sell … cheaper."

Even with the Surface sales surge, Microsoft has a long way to go. According to IDC, the technology research firm, Apple shipped 29.7 percent of all tablets worldwide in the third quarter of 2013, while Samsung shipped 19.7 percent. Microsoft shipped 0.7 percent.

Toward the end of the earnings call, one analyst remarked that Surface is still losing money, and asked Microsoft's Hood how many of the tablets the company would need to sell "to make some money."

"We've learned a lot over the course of this journey," Hood said, "and we have to make more meaningful progress … I think we've made a big leap from [version one] to [version two], and I look forward to making leaps as we go forward in our product road map. But I do think it's more to think about it as a goal we absolutely have as we continue to innovate the line."

Microsoft posted strong results for the quarter, exceeding analysts' expectations. The stock rose 3.5 percent in extended trading Thursday after the earnings report.

Timothy Stenovec   |   December 18, 2013    7:58 AM ET

The shocking news arrived this weekend: The Surface 2 and Surface Pro 2, Microsoft's second-generation "iPad killer" tablets, sold out in many stores.

Microsoft's been trying for years to catch up to Apple in certain areas, releasing the now-discontinued Zune to challenge the iPod and designing its own operating system for smartphones. The company's first attempt at building its own tablet was a disaster: Relatively few people bought the Surface RT, the base model, which started at $499, and Microsoft wound up having to take a $900 million charge at the end of its last fiscal year for unsold inventory and a $150 price drop.

Yet, according to a report from Mashable on Sunday, the second iteration of Microsoft's tablet, the Surface 2 and Surface Pro 2, was sold out at Best Buy stores in several states, on and on Microsoft's website.

What's going on?

Microsoft isn't saying much besides that it's excited to see the consumer response and is working to keep up with demand. We reached out to analysts and a Surface 2 owner for our answer.

Bottom line: Apple has little to worry about. Microsoft just seems to have figured out that it shouldn't make so many devices, lest it risk another embarrassing write-down. And, apparently, the Surface 2 isn't as bad as the first version, according to one Surface 2 user who got in touch with us.

Michael Cherry, the lead analyst of operating systems at Directions on Microsoft, an independent advisory firm in Washington that tracks the company, speculated that Microsoft "produced a smaller run with the intent of selling out."

"They really made what they thought they could sell," he said. "Good for them -- they were right."

The Surface 2 and Surface Pro 2, which went on sale this fall and start at $449 and $899, respectively, are Microsoft's latest attempt to win share of the lucrative tablet market, which the company entered disastrously late. The original Surface models, first sold in 2012 and early 2013, didn't do particularly well with consumers.

Microsoft sold $853 million worth of Surfaces during its most recent fiscal year. By comparison, "Apple’s iPad sales during roughly the same time frame were $33.2 billion," The New York Times' Nick Wingfield pointed out in September.

Sales of Surface tablets jumped to reach $400 million in the quarter that ended Sept. 30, and Microsoft sold more than twice as many Surfaces that quarter as the previous quarter, the Wall Street Journal reported. But the doubling was likely due to heavy discounts on the Surface RT, the Journal noted.

A cursory look at Best Buy's website on Tuesday morning showed 32- and 64-gigabyte configurations of the Surface 2 "unavailable" for in-store pickup in stores around New York City, Philadelphia and Los Angeles, though at least one configuration of the Surface Pro 2 appeared to be in stock at some of those same stores.

A Best Buy spokesman told HuffPost that the company receives new shipments all the time, and just because the device is shown as unavailable online doesn't necessarily mean it's out of stock in the store.

"Last year this quarter they shipped way too many [tablets] so they learned their lesson," said Jitesh Ubrani, a research analyst for IDC's Worldwide Tablet Tracker. "This quarter they've reduced the shipments."

All configurations of Microsoft's latest tablet, save for the 128-gigabyte Surface Pro 2, were listed as "out of stock" on Microsoft's website Tuesday morning.

"The public response to Surface has been exciting to see," Ben Reed, senior manager of Surface, wrote in an email to HuffPost. "It is our primary goal to get Surface 2, Surface Pro 2 and new Surface accessories into the hands of all people who want the most productive tablets on the planet. We’re actively working with our manufacturing teams and retail partners to get Surface in their hands as soon as possible."

The new tablets received a positive review from The New York Times, and Microsoft is spending a significant amount of money on marketing them.

Chris Jones, vice president and principal analyst at Canalys, an independent analysis firm, wrote in an email that marketing efforts by Microsoft and Intel, as well as an increased retail presence, "will help Microsoft and its partners build some momentum."

"However," he wrote, "against Apple and a raft of low-cost Android tablets, it is still going to be a long road for Microsoft in tablets.”

Apple's share of tablets shipped worldwide last quarter was 29.7 percent, while Samsung's was 19.7 percent, according to IDC. Microsoft accounted for only .7 percent of tablets shipped worldwide. Microsoft declined to provide sales figures to The Huffington Post.

The Surface is marketed as a tablet/computer hybrid that can serve both the needs of work and play -- that is, it can be used as a laptop but also as a tablet to stream movies and play games. PC sales have declined as an increasing number of people have turned to mobile devices, and Microsoft is hoping the Surface will partly fill that void and attract those who want the functionality of both a tablet and a laptop.

Gerald Tucay, a 38-year-old accountant who lives in Santa Barbara, Calif., traded in his Surface, which he said was "sluggish" and would "crash frequently" and drop its Wi-Fi signal. He got a Surface 2, and has so far been "very happy" with it, he said.

"What I like about the Surface is the portability and [Microsoft] Office," he wrote to HuffPost in an email. "I don't see it as a replacement of my desktop/laptop but an extension of it."

"The Surface 2 doesn't crash any apps even when I have 5-6 apps open, [and] Wi-Fi dropped only a few times," he added, noting that battery life is "slightly longer."

"But overall, [it's] much faster than the first one and the display is great. Minor hardware upgrades, but [that] makes a big difference."

The Lenovo Yoga Tablet

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Bill Rigby   |   August 26, 2013    9:04 AM ET

(Reuters) - The next CEO of Microsoft Corp has one big decision to make: press on with retiring chief executive Steve Ballmer's ambitious plan to transform the software giant into a broad-based devices and services company, or jettison that idea and rally resources around its proven strength in business software.

Ballmer's grand design - unveiled just six weeks before Friday's surprise announcement that he would retire within a year - calls for 'One Microsoft' to pull together and forge a future based on hardware and cloud-based services.

But poor sales of the new Surface tablet, on top of Microsoft's years-long failure to make money out of online search or smartphones, have cast doubt on that approach.

For years, investors have called on Microsoft to redirect cash spent on money-losing or peripheral projects to shareholders, while limiting its focus to the vastly profitable Windows, Office and server franchises.

Activist investor ValueAct Capital Management LP, whose recent lobbying of the company may have played a role in Ballmer's decision to retire earlier than he planned, is thought to favor such an approach.

In the last two years alone, Microsoft has lost almost $3 billion on its Bing search engine and other Internet projects, not counting a $6 billion write-off for its failed purchase of online advertising agency aQuantive. It took a $900 million charge for its poor-selling Surface tablet last quarter.

For now at least, Microsoft seems intent on pursuing Ballmer's vision. John Thompson, Microsoft's lead independent director who is also heading the committee to appoint a new CEO, said on Friday the board is "committed" to Ballmer's transformation plan.

The eventual choice of that committee - which has given itself a year to do its work - should provide a clue to how committed the board really is, and how open to outside advice.

"Taking an internal candidate like Satya Nadella - the guy nurturing servers - or some of the other people on the Windows team, that makes sense to keep a steady hand through this reorganization and strategic shift," said Norman Young, an analyst at Morningstar.

"But a strong case could be made that the company needs a breath of fresh air, someone who can execute on the strategy but also bring an outsider perspective," he added.

That could mean selling the Xbox and abandoning Bing, or cutting short efforts to make tablets or other computers.


Throughout the last decade, as Microsoft's share price has remained flat, shareholders have called for bigger dividends and share buybacks to beef up their returns.

Microsoft obliged with a one-time $3 a share special dividend in 2004 and has trebled its quarterly dividend to 23 cents since then.

But shareholders still want a bigger slice of Microsoft's $77 billion cash hoard, $70 billion of which is held overseas.

Rick Sherlund, an analyst at Nomura, believes that if the retirement of Ballmer means the company is listening to ValueAct and its supporters, then action on the dividend and share buyback could perhaps happen as early as September 19, when Microsoft hosts its annual get-together with analysts and is expected announce its latest dividend.

"The momentum of shareholder activism is well underway and likely to benefit shareholders even though the process of how this unfolds is not certain," said Sherlund.

The lackluster performance of Microsoft's stock has long been the stick that shareholders beat Ballmer with, and it has looked all the worse compared with the staggering gains made by Apple Inc under Steve Jobs.

Yet Ballmer - who owns just under 4 percent of the company - never showed any doubts about his intention to stay in the job. His old friend and ally Bill Gates, who still owns 4.8 percent of the company, never wavered in his public support.

The first public signs of dissent on Microsoft's board came in 2010, when Ballmer's bonus was trimmed explicitly for the flop of the infamous Kin 'social' phone and a failure to match Apple's iPad, according to regulatory filings.

It was around that time, though not necessarily connected, that the board started considering how it would manage a succession, according to a source familiar with the matter. Ballmer and the board began talking to both internal and external candidates.

About 18 months to two years ago, Ballmer started thinking seriously about a succession plan, the internal source said.

The time since was not marked with glory for Ballmer, with a tepid launch of Windows 8, the disappointment of the Surface tablet, and a $731 million fine by European regulators for forgetting to offer a choice of browsers to Windows users.

Two to three months ago, Ballmer started thinking seriously about his retirement and concluded it was the "right time to start the process," the source said. That was shortly after ValueAct took a $2 billion stake in Microsoft.

July's gloomy earnings, which offered no immediate hope of quick improvement, may have sealed the decision. Ballmer said Friday he made the choice in the few days prior, and informed the board on Wednesday. Whether the board urged Ballmer to leave is not known.

The impending exit of Ballmer leaves a difficult and perhaps impossible choice to his successor - pushing a large and insular behemoth through a highly risky transformation to the mobile world, or clinging to an island of profitable but PC-centric businesses.

"I'm not sure there is someone who can do Steve's (Ballmer's) job 'better'. It's an incredibly difficult job, perhaps intractable," said Brad Silverberg, a former senior Windows executive and co-founder of Seattle venture capital firm Ignition Partners. "Perhaps the way the job is defined needs to change, and this is the harbinger of bigger changes to come."

(Additional reporting by Liana Baker in NEW YORK; Editing by Jonathan Weber and Miral Fahmy.

  |   August 23, 2013    2:50 PM ET

Microsoft dropped major news on Friday when it announced that its longtime chief executive, Steve Ballmer, is going to leave the company. While it's unclear if Ballmer left on his own or was forced out, it's apparent to everyone that Microsoft just isn't the behemoth it used to be.

Here are four charts that tell us why Ballmer is probably leaving Microsoft:

The Stock Has Tanked
First, the obvious: stock price. Microsoft isn't as valuable as it was when Ballmer took over, and keeping that share price up is a CEO's main responsibility. In 2000, Microsoft was worth nearly $400 billion. On Friday, it was trading at around $286 billion. Lose several billion dollars like that, and investors will take issue.

microsoft charts

No One Is Buying PCs
Underlying that stock drop is the decline of Microsoft's main business: Windows. The PC operating system is the company's biggest money-maker, but customers are increasingly using cell phones and tablets to access the Internet and do everything else they do with computers. Analyst Horace Dediu of Asymco shows how that trend caught up with Microsoft by 2011, when Windows sales actually started declining year over year.

Everyone Buys Tablets
And more than any other product, it's tablets that are replacing PCs that run Windows. See how PC sales slow down as tablet sales shoot up, in this data from research firm IDC.

microsoft charts

And It's Probably Not Changing
By 2012, when Microsoft got around to releasing Windows 8 RT for tablets, the market had already been eaten by Apple's iOS and Google's Android. Microsoft sold far fewer Surfaces than it expected, causing it to take a nearly $1 billion writeoff. The dominance of those two top operating systems is projected to last for some time.

microsoft charts

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