Microsoft's former star product, Microsoft Surface, is gradually losing its aura.
According to a number of media reports, in the 10th Canalis Channel Forum recently, Lenkey Group’s president and chief operating officer Lanqi predicted that Microsoft may close the Surface hardware business by 2019. He said that Microsoft's current main revenue comes from cloud computing, Windows and Office software, "but lost a lot of money in the equipment business." He also pointed out that for Microsoft, the hardware business operation is more difficult, because the profit margin of this business is very thin, so Microsoft needs to be careful in every detail.
Marius Haas, chief commercial officer of Dell, said that Microsoft's Surface hardware has completed its historical mission and Microsoft needs to slow down its own pace. Steve Brazier, president of market research firm Canalys, also pointed out that Microsoft’s current CEO Satya Nadella paid more attention to the software business. “Surface’s market performance is not stable. Some quarters are very good, and some quarters are very "Oops, it's not profitable overall, and Microsoft has no reason to continue to maintain this business."
However, according to Microsoft’s response to 21st Century Business Herald, “Surface will continue to drive growth in product categories, redefining how people create, learn and work. We will continue to innovate, create new devices, and provide new And the far-reaching experience."
Unsatisfactory
After a brilliant period of previous years, Surface's recent performance has been unsatisfactory.
According to Microsoft’s latest financial report, in the fourth fiscal quarter ended June 30, 2017, Microsoft’s personal computing business revenue was US$8.82 billion, a year-on-year drop of 2%, including Surface Pro tablets, Surface Book notebooks, and The Surface hardware business, including the Surface Studio desktop PC, fell 2%. Microsoft explained the reason for this decline in business as "a two-in-one premium and a dynamic terminal product price competition."
However, it is worth noting that this is not the first decline in Surface hardware business performance. In the previous quarter, the Surface business also damaged Microsoft's overall profit. As of March 31, 2017, Microsoft’s personal computing business revenue in the third fiscal quarter of fiscal year 2017 decreased by 7% to US$8.8 billion, and Surface revenue decreased by US$285 million, a drop of 26%.
On the one hand is Surface performance continues to decline, on the other hand, Surface's competitors are also continuing to market. On October 4th, Google’s PixelBook 2-in-1 device, which is considered by the industry as the comparable Surface Book and other high-end Windows devices, has been booked. This device, powered by the Chrome OS system and stylus, will be available in the United States, the United Kingdom, and Canada on October 31st.
Lenovo launched the Miix 520 2 in 1 device this year, trying to compete with Surface. Similar to the SurfacePro, the Miix520 has a detachable keyboard, adjustable stand and stylus, and a far-field microphone to help users send voice commands within 4 meters. This product will also start selling in October.
"Only looking at the main Surface Book and Surface Pro series products, according to IDC data, the worldwide growth in shipments from 2014 to 2016 is 27%, 86%, and -30%, respectively," IDC China said. District Tablets analyst Chen Yixuan told the 21st Century Business Herald reporter, “It can be seen that in 2016, Surface's shipments fell globally. On the one hand, the competition of similar two-in-one products became more intense in 2016. On the other hand, it may also be that Surface products are still weak after 2016, lacking breakthrough product innovation."
Microsoft's choice
Microsoft Surface, which was launched in 2012, has been in business for five years now.
In five years, dramatic changes have taken place in the global PC market. According to data from international market research institutions Gartner and IDC, global PC shipments continued to decline in the second quarter of 2017. Gartner estimates that global PC shipments in the second quarter of this year decreased by 4.3% year-on-year to 61.10 million units, the lowest since 2007. IDC said that global PC shipments in the second quarter decreased by 3.3% year-on-year to 60.5 million units.
In fact, as early as 2012, the global PC market began to show signs of fatigue. According to a research report released by IDC, global PC sales fell by 3.7% in 2012, which is the first annual decline in the global PC market in more than a decade. Since then, the performance of the PC market has continued to slump.
Under this market pattern, Microsoft released the Surface Book. On the surface, it is equivalent to putting itself in the same arena with the original PC manufacturer allies (Dell, HP, Lenovo, etc.). It is believed that Microsoft's move will trigger a conflict with original equipment manufacturers, and the launch of the Surface series is a bad competitive strategy.
But there are opposite views. "If Microsoft did not do its own Surface, leading computer makers that have already begun to decline develop innovation, the latter's days are estimated to be even more sad." An industry insider who declined to be named admits, "Although the rise of smart phones and tablets has affected The PC industry, but the stagnation of product innovation is the main reason leading to the continued decline in PC shipments.From the surface, Microsoft's involvement in the hardware field will compete directly with the original equipment manufacturers, but in deep view is inspiring them in the new The target market's actions will ultimately benefit the consumer computing device market."
"According to the current layout, Microsoft is not likely to give up the Surface series business within five years." Chen Yixi told the 21st Century Business Herald reporter bluntly, "Although the hardware profit is meager and requires a lot of investment, but any one of the Surface series once successful This brings not only the revenue of the hardware itself, but also the revenue generated by a large number of traditional vendors, and the revenue generated by consumers using the software or services. In other words, Surface’s current strategy may be to grasp the brand of high-end hardware. Location, drive overall industry development, bring greater profits."
As for the current situation in which Surface is currently in an unstable and unprofitable position, Chen also suggested that Microsoft seize the changes in the actual business needs of the commercial market and opportunities brought about by the digital transformation. "In the long run, growth in performance still requires Microsoft to make product improvements or create changes in the consumer experience."
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