Microsoft CEO touts new Surface tablets

Friday 16 May 2014 11.02
Microsoft set to unveil the third generation of its Surface at an event next week
Microsoft set to unveil the third generation of its Surface at an event next week

Satya Nadella has enjoyed a fairly smooth ride in his first 100 days as Microsoft's chief executive.

But he risks hitting a rough patch next week when he unveils the latest models of the tepidly received Surface tablet. 

Investors have lapped up Nadella's "mobile first, cloud first" strategy to recast the venerable software maker as a "devices and services" company, sending its shares up 9% since he took the helm. 

So far he has stressed the services side of the business, making the momentous move to put Microsoft's Office suite on Apple's iPad.

This was popular with Wall Street and more importantly with consumers, who performed 27 million downloads in a matter of weeks. 

But Microsoft is expected to unveil the third generation of its Surface devices at an event next week.

It has given hints that it will also introduce a smaller tablet, to address the fast-selling lower end of the market dominated by Apple's iPad mini, Amazon.com's Kindle Fire, Google's Nexus and Samsung's Galaxy range.

The devices side of the strategy has been a challenge. Microsoft's Surface, launched in October 2012, has about 2% of the market and has not made a dent on Apple's iPad. That fits with Microsoft's 3% global share in smartphones. 

Given that tiny market, some investors believe Microsoft should not waste time and money on the low-margin hardware business. 
             
Despite unspectacular sales, there are signs that Microsoft's Surface Pro 2, which runs the full Windows operating system, is starting to attract Microsoft's core business customers. 

Even if the Surface never dominates the market, analysts think Nadella and Microsoft are right to persevere with hardware, if only as a way of showing other device makers how best to make use of Windows.