Microsoft has been standing at a cross roads for a number of years now.
When it came to their efforts with Surface and tablets going forward, I'm of the opinion they should have brought a version of Windows Phone to tablets. Microsoft is losing the app war in mobile. By brining Windows Phone to a larger screen form factor and releasing tools to write software for both phones and tablets, Microsoft could have made better strides developing the app ecosystem that is so valuable to the end market.
Instead they chose to focus on a legacy solution in Windows rather than a future platform like Windows Phone.
Time will tell if Microsoft can navigate the troublesome waters they find themselves in. Needless to say, so far their exploits in tablet hardware and tablet solutions have added to the book of what not to do.
Where to go from here
As I wrote a few weeks ago, OEMs using Windows 8 are better off making products following the 80/20 rule. Make the product from the ground up to be either 80% tablet and 20% notebook. Or make the product from the ground up to 80% notebook and 20% tablet. Predictably, the Surface tried to be equal parts tablet to equal parts notebook and ended up not very good as either.
After spending some time using the Surface RT I was compelled to write a column entitled: "When is a tablet not a tablet? When it's a Surface."
Surface, as I concluded, is a form factor stuck in no man's land. It is (was) a heavily compromised notebook and a heavily compromised tablet. Someone looking to buy a tablet would have been better off buying a device that is better as a tablet, like an iPad. In fact, even 10" Android tablets are better than the Surface as far as tablets go and that is really saying something. And if someone wanted a great laptop, the Surface was also not the answer. Said consumer would be better off buying an actual laptop.
Lost without a consumer compass
When you look at Microsoft's write-off this quarter 100% came from the consumer space. Yet roughly 80-90% of their operating profits came from enterprise customers. Aside from the XBox video game system, Microsoft has never had a handle on the consumer market in my opinion. In computing, much of the consumer market they won, they won by default. Now that they actually have to compete with companies who understand consumers better than they do and they are loosing on a grand scale.
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Unfortunately, I don't see this changing any time soon. I am highly skeptical of the success of Microsoft's re-org and they are yet to show any signs of understanding the pure consumer market. Because of this confusion they are writing off $900 million dollars worth of leftover inventory. By my approximations that equates to about 3 million unsold Surface RTs. Reports were also circulating that Microsoft cut orders down from their initial order from the manufacturer. Meaning they genuinely thought they would sell quite a lot. How wrong they were.
Microsoft needs to decide what kind of a company it wants to be in 20 years and craft a strategy with that vision in mind. Do they want to be a hardware company, software, company or services company? Do they want to be all three? Do they want to be a consumer focused company or an enterprise and business focused company? Do they want to focus on solving mobile problems or cloud problems? These and more are all questions the once dominant company in Redmond needs to come to grips with.
My fear for Microsoft is not just that they lost their consumer compass, but that they have lost sight of who their customers are and what problems they need Microsoft to solve for them with hardware, software, and services.
The Surface was an epic example of not only not knowing who their target customer was, but not even understanding what form factor the market wanted. Surface RT was a solution in search of a problem no one was asking to have fixed.