Microsoft Surface: A Study in Erroneous Product Definition

NEW YORK ( TheStreet) -- Microsoft ( MSFT) unveiled improved versions of its two tablet-laptop combo devices: One based on Intel ( INTC); the other based on ARM, in this case Nvidia's ( NVDA) Tegra 4. My prediction is that sales success will largely elude Microsoft yet again.

First of all, however, let me point out that both new Surface versions are solid improvements over their predecessors. The screens are better, the processors are faster and more power-efficient and there are exciting new peripherals -- keyboards and docks.

Microsoft's argument for the Surface remains what it was the first time around, a year ago: Laptop and tablet, all in one! I will explain why this just doesn't work out.

If your objective is to use a laptop for anything more than an hour's worth of tortured play, you need to have a screen that's larger than 12 inches, preferably at least 13 inches. In addition, you need the keyboard to be large enough.

The Microsoft Surface fails this essential test. It has a 10.6-inch screen, and a resulting cramped keyboard. This is OK for a small child. It is unsuitable for working adults.

The other problem is the relationship between the keyboard and the screen. In a regular laptop, the bulk of the weight resides under the keyboard, and the screen is held up by a hinge that inherently must be "stiff" so that the screen stays in place at the desired angle, no matter how you move the laptop around.

In contrast, the Surface has almost all its weight in the "screen" portion. Then, the keyboard is attached to the screen with a "limp" magnet/hinge combo. That's great in one way because it makes it detachable, but it also makes it very difficult to use the device unless it's placed on a hard and flat surface (no pun . . . ).

The problem is, that often enough, I place my laptop on places other than a hard/flat surface. It's sometimes in my lap, sometimes in my hands when I'm laying on the sofa or in bed, or sometimes on a very shallow table where part of the laptop's base sticks out.

In other words, even if the Surface were 12, 13, 14 inches in size, the fundamental idea of a limp hinge just isn't going to cut it as a laptop. Game over.

The basic laptop form factor hasn't evolved a bit in 25 years. In Microsoft's view, that apparently made it suspicious and needed to be changed. However, it didn't evolve for the basic reason that the human ergonomics hasn't evolved.

Even Apple's ( AAPL) and Google's ( GOOG) laptops make no attempt at changing the basic laptop formula. The advancements have come in terms of software, services, cloud infrastructure around the laptop, better battery life, getting rid of hard disks in favor of solid-state storage and most recently also the emergence of fanless laptops thanks to power-efficient chips. But not the basic form factor.

Microsoft saw a round wheel on cars and said "A round wheel has been around forever. Let's change it!" It was change for change's sake. A wheel that isn't round isn't an improvement upon a round wheel.

OK, most people clearly have no interest in the Surface as a laptop. But what about as a tablet?

Crickets, crickets . . .

People tend to buy tablets for two reasons:

1. They are cheap.

There are many Google/Android tablets for sale in the $100 to $300 range. When something of that size sells -- without a contract -- for that kind of price, you have a very economical way to read books, magazines, perhaps watch some videos -- movies, TV shows, podcasts, etc.

The new Surface starts at $449. You want the Intel-based one? That'll be $899 and up. Keyboard not included. Clearly, Microsoft doesn't win the price argument. Not yet anyway.

2. They have lots of interesting apps.

If you want apps, the answers are Android and iOS -- not Surface. Yes, it's true: Surface has lots of apps. Over 100,000 of them. The problem there is: Apple and Google have 1 million of them.

The argument that 100,000 apps -- or 200,000 or 400,000 -- is enough, is simply not a good argument. You may only use 10 apps, but if six of them are among the 600,000 or more that you don't offer, it's game over.

What about Microsoft Office?

This is always Microsoft's last line of defense. You want to run Office on your tablet!

No, you don't.

First of all, you're not going to "real work" on anything that's 10.6 inches (or smaller) in screen size. So we're back to the argument above regarding the Surface not making it as a laptop.

Secondly, Office itself is losing in relevancy rapidly. Increasingly, people find that Google Docs does the job for free -- and with better collaboration and cross-platform compatibility. Google has even made QuickOffice available for free, further improving Office compatibility.

The situation with Office alternatives is the biggest threat of all to Microsoft. Without Office, Microsoft seems totally out of gas in terms of a sales argument.

If you are truly not just in need of Office, but are convinced that the (free) alternatives to Office are not enough, then you are also likely the same very serious person for whom a 10.6 inch-anything (tablet, laptop, whatever you want to call it) is not enough either.

Microsoft made a huge mistake in its launch of Windows 8 one year ago. It shifted the focus to new form factors and a second interface residing in the PC side by side with the traditional desktop.

Windows 8 solved the biggest problems with previous Windows versions: Speed, security and stability. People came to dislike Windows in the past because it was slow, had virus problems, and was generally a maintenance nightmare.

Windows 8 boots extremely quickly, runs smoothly, has a far more secure environment, and shuts down extremely quickly. It is extremely competitive with Apple's Mac in this regard, and you can buy a decent Windows laptop for $500 (or even less) -- half compared to Apple.

The good news here is that you can buy a good Windows PC (laptop) today, at a fair price. It just isn't Microsoft's own Surface device, which is an ergonomic nightmare and generally too expensive for what its form factor offers.

With the Surface -- and to some extent Windows 8 in general -- Microsoft finds itself squeezed between the following competitive pressure points:

1. Google Chrome OS: These laptops start at $200 and provide for excellent typing and other basic productivity tasks.

2. Google Android: These tablets are cheap ($100-$350 in most cases) and have 1 million apps.

3. Apple Mac: A proven user-friendly PC operating system starting at $1,000, similar to high-end Windows 8 machines.

4. Apple iPad: Outstanding multimedia machines with 1 million apps.

In my view, I see Microsoft continuing to lose share to these four competitive pressure points, and gaining share in no noticeable area. That's big problem for Microsoft.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

At the time of publication, the author was long GOOG and AAPL.

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