Microsoft Surface Devices Ultimately Rises Up To & Beyond Apple

Lots of things have changed since Mr. Satya Nadella has taken over reigns from Mr. Ballmer. While Steve was adept at selling and growing Microsoft business through the entire 2000 decade, Nadella is a clear visionary in tying all the assets together transforming Microsoft not one but two steps forward. The new Microsoft seems less monopolizing, more innovative and cool. The latest October 6th 2015 event provides further evidence of Microsoft not only excelling in cloud, software and services space but also tying those and integrating them well with head-turning and state-of-the-art hardware design.

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During the event, Nadella let EVP of Devices Terry Myerson & Corporate VP of Devices Panos Panay lead the show as he sat backstage and cherished the unveiling of cutting edge hardware appreciating the efforts put forward from his team. Following were some of the significant announcements (with our comments):

Windows 10

  • There are more than 110 million devices running Windows 10 since the rollout in last eight to ten weeks.
  • Out of these, 8 million business PCs are already running Windows 10
    • This is the fastest rollout for any Windows version yet
  • Since the rollout Windows 10 store has seen more than 1.25 billion visits
  • Almost 650 billion web pages have been already viewed in just 10 weeks with the new “Microsoft Edge” browser.
  • Microsoft’s AI assistant Cortana has answered more than a billion questions in last ten weeks or so
    • That’s massive data to mine and learn more about users. This is tremendous level of scale Microsoft ecosystem is already enjoying with the rollout of Windows 10
    • Unifying with common code base and build a “true connected” ecosystem across form-factors leveraging common software and cloud services
    • This immediately offers tremendous scale for developers to target millions of Windows 10 PCs alongside Windows 10 smartphones and other devices such as XBox, Band, HoloLens and more 

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  • Big ticket developers such as Facebook are reworking on building Universal Apps for Windows 10 – Facebook, Instagram and Messenger to likes of Uber, Candy Crush, Audible, and so forth
    • While big developers have been announced before as well but we have seen lots of apps still stuck in beta and lack updates and features compared to that on iOS or Android. The push for high quality and consistently updated apps would be key to growth of Windows ecosystem, Microsoft has its work cut out.

Xbox

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  • Windows 10 will be rolling out across Xbox One during the upcoming holiday season and will bring new Microsoft experiences to the popular console
  • Almost 120 years of gameplay streamed from XBox to Windows 10
    • Bringing Windows 10 to Xbox and enabling game play using the Xbox Elite controller will catalyze the PC gaming industry
    • Gamers are going to spend roughly $34 Billion on PC games alone this year according to Intel
    • PC gaming is about to surpass console gaming next year in terms of revenue generated
    • PC gaming audience is also huge, there are estimated 250 million PC gaming viewers globally
    • Bringing Xbox to PC and vice-versa leveraging Windows 10 will also open up a huge opportunity in education & training vertical for Microsoft and developers – “gamification based learning” is rising

HoloLens

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  • Microsoft also announced developer kit for its AR/VR platform HoloLens shipping in Q1 2016 for $3000
    • HoloLens has significant potential not only in enterprise but education, gaming, retail and other segments as well
    • Microsoft jumping in early into this alongside giant Facebook should be enough to catalyze developers though Apple if enters could change it completely
    • Looking at the developer kit pricing, the technology will be initially targeted for enterprises by Microsoft as there where the major buck is whereas Facebook will take it mainstream to build its social map and mass-market advertising

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 Band 2

  • Microsoft also unveiled its second generation wearable – Microsoft Band 2 with a new curved AMOLED display with Gorilla Glass 3 design for wrist sporting more than 11 sensors driving Microsoft Health app and cloud integration priced at $249.
    • This is by far one of the best activity tracker on the market filled with advanced sensors and improved ruggedized design
    • The array of 11 sensors from 3-axis accelerometer, to GPS to gyrometer, haptics motor to skin temperature and barometer offering a holistic health and fitness tracking experience all synced to Microsoft Health cloud accessible across devices as well as supporting competing platforms such as iOS & Android
    • This is an important piece for extending Microsoft’s cloud and services integration for one of the important use-case as a fitness tracker and notification device to push users to focus on fitness ubiquitously and be more productive
    • IoT is the big opportunity for Microsoft across verticals, Microsoft Band addresses a small segment in the same

Surface

  • Microsoft continued to lead the PC industry in terms of  “showcase design” with its Surface franchise demonstrating a beautifully designed upgraded “Surface Pro 4” but also stunned the industry by unveiling its first laptop “Surface Book” which is a detachable hybrid with a state-of-the-art and stunning head-turning design never seen before.

  • Surface Pro 4: Microsoft refreshed its 3rd gen Surface model unveiling the new thinner, lighter Surface Pro 4 built ground up again for the new Windows 10 platform and a newer display-touch technology which Microsoft calls “PixelSense” and a redesigned Surface Pen for the new display, Windows 10 and link to the AI assistantCortana with a click of a button.
    • Microsoft is positioning Surface Pro 4 to not only catalyze tablet market but also compete comfortably against MacBook Air and the new iPad Pro.  
    • Microsoft’s Surface is on track to achieve US$3.5 Billion revenues per year business in 2015 that too with controlled and limited distribution reach. Surface revenues will surpass  Microsoft’s Phone division’s annual revenues this year.
    • Microsoft is expanding Surface distribution from over 150 to 4500 resellers globally, Dell & HP are partnering with Microsoft to sell Surface Pro devices to their enterprise channels globally which will boost Surface’s business by a greater margin.
    • This also provides more evidence that companies such as Dell & HP are now more focusing and gravitating towards end-to-end enterprise software and services led model thus  complementing Microsoft with a very partner-centric model
    • We estimate that the Surface business will cross $5 billion in revenues in CY2016 

Surface Book whole

  • Surface Book: Microsoft has launched this unique form-factor with an impeccable hinge but detachable hardware design sporting the advanced 6th GenSkylake Intel Core processors with a stunning 13.5″ PixelSense display with a resolution of 3000×2000 pixels with Surface Pen support powered by under the hood NVIDIAGeForce GPU with has its own dedicated 1GBGDDR5 high-speed memory and much more
    • This is a no small feat from Microsoft which is primarily a software company, unveiling the industry’s most advanced design to leverage the power of touch enabled Windows 10 platform and the applications.
    • This truly is the “ultimate laptop” as Microsoft positions it and has leaped ahead of Apple in terms of design. Microsoft also boldly compared it to Apple’s Macbook Pro showcasing how surface Book is better not only in hardware design but also performance with the latest hardware integrating advanced touch-enabled Windows platform
    • Microsoft’s Surface Book will definitely have a n “halo effect” on the “tablet & laptop” category as a whole to capture the consumer and enterprise mindshare and reignite the need for consumers to upgrade to next generation computing devices which can not only be in traditional form to do traditional work but can adapt their form-factor to the newer touch-enabled use-cases and applications to maximize creativity, productivity and entertainment 
    • Though the success to touch-enabled Windows 10 ecosystem is still partly dependent also on attracting marquee developers to build ‘Universal apps‘ for Windows 10 platform which can leverage the huge hundreds of millions of PC installed base as well as other devices from Lumia phones to Band to Xbox to Holo Lens and so forth
    • We believe the ramping Windows 10 adoption after Windows 8 debacle coupled with Microsoft’s vision to guide it partners to innovate a bit more with hardware as well as software design will attract more developers to the fold than before
    • We believe Microsoft and its partners quite rightly are realizing the fact that to beat Apple in premium PC or tablet space they need someone with a more vertically integrated model and Microsoft is in the best position to do that considering its stronger control not only on software and cloud but also on a highly integrated and premium-grade hardware design
    • Its a two-pronged strategy from Microsoft’s ecosystem to take on Apple – Microsoft and a few other vendors (Asus, Dell) are capable and will attack the premium Apple market whereas the rest of the market where most of the volume and scale play is left out for other Windows hardware partners which we believe is the right strategy

Lumia

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  • Microsoft unveiled two Windows 10 powered premium flagship Lumia phones – Lumia 950 (5.2″ QuadHD) & 950XL (5.7″ Quad HD) the  featuring the highly differentiated and cutting edge camera technology leveraging Nokia heritage running the advanced Qualcomm Snapdragon 808/810 processors with the latest USB Type-C and microSD card support up to 200GB for $549 & $649 respectively. Microsoft also launched its cheapest LTE capable Windows 10 smartphone for the masses -Lumia 550 (4.7″ HD) at $139
    • Learning from Windows 8 based phone apps ecosystem which reached a respectable quantity in terms of marquee apps availability, however, on quality scale the apps were way behind in terms of launch timing, overall experience and features when compared to the same apps’ versions on iOS or Android.
    • Windows has 3% marketshare at the end of Q2 2015 and is forecasted to grow marginally to 4% by next year.
    • Developers almost neglected consistent app experience development for Windows users slowing down the adoption of Windows based smartphones. Microsoft hopes this to change with the success of Windows 10 on PCs and Microsoft’s push for Universal Apps which will help drive quantity and unanimous quality across form-factors
    • Furthermore, Microsoft’s move to help developers easily port apps from iOS and Android to Windows 10 ecosystem will also catalyze this development
    • To help drive this development, along with the cutting edge hardware, Microsoft also launched a Microsoft Display Dock to leverage the power of Windows 10 Universal Apps and “Continuum” feature which transforms a smartphone into a mini laptop when connected to the screen via the dock offering a fuller Windows 10 desktop grade app experience.
    • Windows “Continuum” and proliferation of Universal Apps remains the key to stimulate the Windows ecosystem for smaller screens i.e. smartphones
    • The new flagship Lumia ticks all the boxes in terms of specifications and are attractive devices for existing Windows users to upgrade or new users who are looking for the best productivity smartphone right now, a must for enterprise users.
    • The Windows smartphone  is still to get its “Surface moment” and is still ripe in Microsoft’s eyes to dedicate resources at this point. Laying off significant Nokia talent after Nokia Devices acquisition can also be one of the indicators of either Microsoft is consolidating resources to lead a Surface like business model for smartphones or is not that interested as it is in enterprise side PC hardware or consumer gaming consoles at Xbox
    • Though we still believe that Microsoft understands the importance of premium hardware play in smartphones and the need to build the halo effect as it is building with Surface in PC and tablet space to take on Apple but might be delaying it purposefully
    • Microsoft is still waiting for the Windows 10 to scale up and more Universal Apps to proliferate in the Windows store, build the accompanying wearable franchise and next year go for a bang with an “Ultimate Smartphone” as it has now taken three years to build an “Ultimate Tablet” & “Ultimate Laptop” in form of Surface Pro & Surface Book

To summarize, Microsoft’s latest device launch event demonstrates its not at all prudent to underestimate the software and cloud tech giant which has developed its vertical integration expertise in a much more meaningful way producing stunning and tightly integrated Apple-Class hardware, software and services experiences across form-factors. Microsoft has unveiled challenging hardware to clearly take on Apple in premium tablet and PC segment coupled with positive Windows 10 adoption. Though in smartphone space the “ultimate smartphone” remains elusive. We will have to wait for a year or so to see how Windows 1o platform matures and when is the right time for Microsoft to unveil the “ultimate smartphone” to take on Apple iPhone. This is certainly a new, upbeat, cool and innovative Microsoft. Watch out Apple!