Steve Brazier of analyst firm, Canalys, said at his firm’s Channels Forum Event in Venice, that Microsoft will drop out of the Surface business by 2019, according to Channelweb. Brazier bases this on two main reasons.
- Brazier believes that Microsoft’s Satya Nadella is ‘a software guy’ and that was part of the reason that the Windows Mobile business was allowed to decline
- The business performance of the Surface business has been ‘choppy’ and is, overall, not making money.
According to the paper, Brazier said
“It doesn’t make sense for them to be in this business. And when the capital expenditure challenge that Satya Nadella is taking Microsoft down becomes visible to Wall Street… he will have a lot of cost cutting to do, and Surface will be the first target.”
Lanci of LenovoBrazier also pointed to poor reviews from the US Consumer Reports group (Microsoft Surface Laptop Scores Zero for Repairability but, on the other hand, also note Microsoft Ranks Highest in JD Power Tablet Satisfaction Survey). The paper reports that Gianfranco Lanci, COO of Lenovo said that Microsoft could withdraw even earlier.
On a general note, Brazier said that hardware sales will account for at least 50% of revenues for at least 90% of partners by 2020.
“Hardware is not dead. Hardware will be 50 per cent of your revenues through to 2020. Do not listen to your investors telling you to get out of hardware and into services. There is no evidence to support that at all”.
Analyst Comment
I’m sure there is business logic in what Brazier is saying, but it seems to me that one of the reasons that Microsoft got into the Surface project was to encourage its partners which had become less innovative than, especially, Apple. Microsoft has used the Surface range to develop ‘the State of the Art’ and while it doesn’t lose too much, it probably makes sense to keep the business going. However, that may also depend on the view of key stockholders. (BR)
