Sunday, February 24, 2013

Microsoft suffers Surface Pro shortage 2013

Less than a week after Microsoft began taking reservation orders for its 128GB Surface Pro tablet, the company on Thursday again slapped a sold-out sign on its website.
Thursday afternoon, Microsoft's online store displayed "Out of stock" and refused to accept orders for that configuration. The message remained in place Friday. On Saturday, the website said you can order now for shipment by March 1.
The new shortage makes Microsoft's blog post of Feb. 15 seem prescient. Then, as the company announced it would start taking orders for the 128GB Surface Pro, it warned customers that, "Once inventory is depleted, the system will show as 'out of stock' until new inventory is available to ship."
That's exactly what it did.
The Surface Pro has had an up-down-up-down history, brief as it's been.
Microsoft started selling the 128GB Surface Pro on Feb. 9 for $999, but within hours supplies dried up. Customers were furious, frustrated at coming up empty in their searches for the tablet, and took it out on Microsoft in scathing comments on the company's own blog and others.
A week ago, Microsoft reopened online ordering, telling customers that their tablet would ship on or before March 1. Rather than simply extend that shipping date into the future as supplied dwindled -- a practice most other vendors, including Apple, take when orders exceed demand -- Microsoft shut down orders completely.
The $899 64GB Surface Pro, which has been derided by some for having only about 30GB of storage space for customer content and apps, has remained available throughout the sell-outs of its sibling.
The on-again, off-again 128GB Surface Pro availability shows that Microsoft seriously underestimated demand for the tablet-becomes-an-ultrabook, said Ezra Gottheil, an analyst with Technology Business Research.
"It's beginning to look like this isn't a problem with building up enough inventory for the launch, but that Microsoft underestimated demand," said Gottheil, countering those who two weeks ago accused Microsoft of a marketing gimmick by purposefully holding back the tablet.
Instead, Gottheil traced the supply snafu to Microsoft's change in Surface strategy last year.
"Surface was first to be an inspiration to the OEMs, a marketing device to increase awareness of Windows 8, a challenge to the OEMs to come up with better designs," said Gottheil, echoing pundits' takes of mid-2012 when Microsoft surprised the technology industry with tablets of its own design that it would sell itself.
"That made perfect sense then, and didn't bother OEMs too much," Gottheil continued. "I'd also argue that Microsoft succeeded at that. It has been able to increase awareness of Windows tablets, and been able to define Windows 8 tablets as a different breed of cat.
"But somewhere along the line, their emphasis shifted," Gottheil said, of Microsoft. "They started saying, 'We're a device company,' they broadened distribution, they launched a large marketing campaign to make the Surface the thing you want to buy."
Microsoft CEO Steve Ballmer's contention in his annual letter to shareholders last October that, "We see ourselves as a devices and services company," was the first public pronouncement of the shift in strategy.
In Gottheil's scenario, Microsoft's expectations for the Surface under that first strategy were necessarily low, and it placed orders accordingly. "They scoped out much lower component orders," Gottheil speculated, of Microsoft's doings last year.
The current shortages, then, are a result of plotting out one path, then changing directions after the initial ramp-up for the tablet was set in stone with suppliers.
And it may take some time for Microsoft to balance supply and demand, Gottheil warned. Touchscreens are tight for most device makers -- Apple seems to be one of the few OEMs to be immune, likely because of its longer history sourcing components for its iPad line -- and it's possible Microsoft will have trouble upping production of the Surface because of that.
"Microsoft just didn't get a chair at the touchscreen table early enough," said Gottheil.
Analysts and vendors expect that touchscreen inventories will climb in the second half of this year as more production comes on line to meet demand by traditional PC notebook makers, part of which was sparked by Windows 8, part, said Gottheil, due to an increasing familiarity with touch on tablets and an expectation that the same functionality should be on laptops.
"I don't think that many [vendors] expected people to want touchscreens on old-style PCs," said Gottheil.


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