In an interview with the Seattle Times, Ballmer called 2012 “the most epic year” in Microsoft history -- referring to the plethora of updates and services the vendor has dished up, including Windows Server, Windows Phone and the impending Windows 8 OS and Surface tablet — surpassing in importance even the introduction of Windows 95, which integrated DOS and Windows 3.1 into one product, some 17 years ago.
When viewed in that light, it makes the Surface rollout kind of important, wouldn’t you say? So why is Microsoft still behaving so hesitantly about setting the device’s price and establishing a distribution strategy that deploys its largest, most-effective and knowledgeable sales team: its huge network of channel partners? The quick answer is that no one -- at least no one outside of Microsoft -- seems to know or understand what’s up.
Asked if Microsoft intends to position Surface head-to-head with Apple’s (NASDAQ: AAPL) dominant iPad, this is what Ballmer had to say about Surface’s pricing:
“We haven't announced pricing. I think we have a very competitive product from the features perspective…I think most people would tell you that the iPad is not a super-expensive device. ... (When) people offer cheaper, they do less. They look less good, they're chintzier, they're cheaper.Okay, let’s digest and deduce. Right off the bat, unless Ballmer is throwing a knuckle ball -- earlier speculation that Surface will sell for $199 is out the window. But, realistically, we’re not much closer to the pricing answer, considering Ballmer staked a range spanning a $400 differential.
If you look at the bulk of the PC market, it would run between, say, probably $300 to about $700 or $800. That's the sweet spot.”
Then, what about Surface’s marketing and distribution blueprint? Here’s more Ballmer from the Seattle Times:
“I think if you look at the pattern of success, it usually is a powerful, innovative idea formed and driven by a powerful sort of team with great innovators and great executors ... followed up by an incredible kind of — I won't say marketing because it's really more about how you tell your story than just how loudly you tell it.Again, let’s digest and deduce. All that Microsoft has said so far is that Surface will be sold at the vendor’s web site and through its network of retailers, with no word on whether distributors or channel partners will get their hands on it. If Surface only is sold at Microsoft’s web site and through retailers, it’s a good bet that the price will slip toward the low end of Ballmer’s range and margins will be razor thin. That plan, however, would constrict the market mainly to consumers, not the greatest of ideas in a segment the iPad so thoroughly dominates.
Screaming loudly doesn't work very well in our industry. It really matters whether the product fundamentally captures people's imagination, and then you tell the story well around that.
I certainly see Skype sort of on that path. ... We'll have to see whether Surface is a success or not because we haven't shipped any yet. But it certainly has the elements of success.”
As for Surface’s marketing story, Ballmer’s comment that more “mobile form factors” will make it “hard to tell what’s a tablet and what is a PC” may clue us into how Microsoft might focus not on sneaking share away from the iPad but instead broadening the opportunity to a wider class of users -- say, for example, business customers.
If that’s the case, however, shunning channel partners, at least for now, is a curious decision.