Is Microsoft close to quitting Surface hardware? Hardly.

Recently, the news site The Register ran a damning and bold headline that read "2019: The year that Microsoft quits Surface hardware". While the headline may seem hyperbolic, the article goes on to quote Canalys CEO Steve Brazier and Gianfranco Lanci, corporate president and chief operating officer at Lenovo to back the claim.

With the announcement that Microsoft's streaming Groove Music service was going away and what appears like a shift away from the consumer brand by Microsoft, the idea seems plausible. However, there are reasons to doubt its validity too.

What was said

The Register quotes Brazier in saying:

The Surface performance is choppy; there are good quarters and bad quarters, overall they are not making money. It doesn't make sense for them to be in this business.When the capital expenditure challenge that Satya Nadella has taken Microsoft down becomes visible to Wall Street, everyone will ask him 'Why have you gone to a low margin business?

Later, citing continuing needs to cut costs Brazier says that Surface will be the first target.

Lanci also agrees, noting he thinks Microsoft will drop Surface by 2019 (hence the headline) or maybe even earlier. His reasoning:

Microsoft is making a lot of money on cloud, making a lot of money on Windows and Office, but losing a lot of money on devices.And frankly speaking, it is difficult to see why they should keep losing money. For them it is a very difficult exercise to run hardware products business, they need to be careful about every single detail as the margin on this is so thin.

Even Dell chief commercial officer Marius Haas jumped in remarking that Microsoft will likely "slow it down a bit."

None of this even extraordinary.

Going back to 2014, when Nadella was ascending to CEO status, there was a big internal push by so-called activist shareholders to get Microsoft out of the consumer market. Many of Microsoft's investors wanted them to drop Bing, Xbox, and yes, Surface. The pressure is real.

Xbox One X

For years, analysts have questioned if Microsoft should retain - or sell off - its Xbox brand. (Image credit: Windows Central)

Ever since Surface was announced in 2012 rival PC companies have doubted its success, or downplayed its significance (while at the same, riding the wave of creativity and renewed PC passion with their own products).

Why those remarks may not matter

Indeed, there should be some caution when reading those quotes. Lenovo and Dell have a vested interest in softening Microsoft's Surface impact on the PC business. They and others all make Surface clones with their improvements. The thought that these same companies want Microsoft to back out now is biased as they all have a vested interest were it to happen.

There is some hubris here, too, I think as these companies do not appreciate Microsoft outshining them or do not believe that they are, just as the CEO of Palm once dismissed the prospect of Apple making a smartphone.

Creating fear, uncertainty, and doubt is a crucial disinformation strategy, and these are not impartial players.

Second, it should be evident that none of these executives, despite their business titles are operating with any insider knowledge of Microsoft's Surface plans. From personal interaction with many of these same companies, I can tell you they had no idea about the Surface Laptop before it was announced and were caught off-guard. If anything, you dear reader are more informed about Microsoft's upcoming Surface plans through reading this site than most PC OEM CEOs.

Microsoft's Surface plans are well-kept secrets, and the company does not share its hardware plans with its partners. Not only would that be ill-advised, but it could also be illegal as a form of collusion.

Satya Nadella

Satya Nadella (Image credit: Daniel Rubino / Windows Central)

But putting conjecture aside, all we must do is look back a week ago at what Satya Nadella told Bloomberg during an in-depth interview. Nadella specifically noted that Microsoft must continue to make its own hardware. From the article:

It's Alan Kay who said 'if you're serious about your software, you make your own hardware.' I think there's some truth to it.

Being more specific, Nadella notes that to create new device categories with new software experiences they need to do that themselves. Examples like Surface Studio, HoloLens, the original Surface, and Surface Book come to mind.

Nadella also believes in the company making its own hardware because of lessons learned in the past. Nadella rightly criticizes former Microsoft CEO Steve Ballmer and co-founder Bill Gates and the earlier attempt at Windows tablets (pre-Surface) where the company merely made the software. Instead, they left the hardware to Microsoft's partners, and they blew it. In comes Apple with the iPad and the rest, as they say, is history. (The same criticism could be applied to Microsoft Windows Phone too, where a "hero" device from the company early on may have led to a different outcome).

These remarks are relevant because they are not just push back against the idea of them dropping Surface, but a precise and strategic rationale for why they must continue to make their own hardware.

Lastly, we should observe that Surface Laptop doesn't even create a new device category. If Nadella and the Microsoft board were so down on Surface as a brand canceling Surface Laptop before its release would seem to be a given if any of this were true. Surface Laptop was a device they could have nixed, and not much would have changed. A Surface Book "2" and an ARM-based Surface device, not to mention the rumored "Andromeda" hardware for mobile, are all on expected to be released by Microsoft in the coming year.

Perception is the real problem

The elephant in the room, of course, is that Microsoft – through Satya Nadella – is more interested in cloud and enterprise than the consumer market. Many people have yearned for – or been critical – of Microsoft "becoming the next IBM."

While I do think Microsoft is pulling back in some areas for consumers, e.g., fitness wearables, phone, streaming music, etc. the company is also taking more significant risks elsewhere — like Windows Mixed Reality. Getting Microsoft software and services onto all devices, regardless of the OS, is critical (see Microsoft Edge on iPhone and Android).

Dell XPS 13 vs. Surface Laptop: Which laptop should you buy?

Dell XPS 13 vs. Surface Laptop: Which laptop should you buy?

The thought that Microsoft is getting ready to pull the plug on Surface seems way off the mark to me. During our tour of the Surface facilities on the Redmond campus, the amount of money and infrastructure the company is building for its hardware development is unprecedented. Microsoft reorganized its internal leadership structure to reflect this continued push towards software that drives hardware and vice versa.

During my tour, Surface head Panos Panay effused about how with the new Surface Pro the hardware team was able to work more closely than ever with the Windows group because of those purposeful changes.

Nonetheless, the more significant issue here – as elsewhere – is perception. The idea that Microsoft could – or would – cancel Surface is not met with immediate rebuke from analysts, but instead, plausibility is the real problem.

Microsoft's tumultuous last few years with realignment, layoffs, and significant shifts in strategy create a level of expectation where anything can happen at any time. That may not come off as forged destiny, but instead, chaos and that's the worrying part.

Daniel Rubino

Daniel Rubino is the Editor-in-chief of Windows Central, head reviewer, podcast co-host, and analyst. He has been here covering Microsoft since 2007 when this site was called WMExperts (and later Windows Phone Central). His interests include Windows, Microsoft Surface, laptops, next-gen computing, and for some reason, watches. Before all this tech stuff, he worked on a Ph.D. in linguistics and ran the projectors at movie theaters, which has done absolutely nothing for his career.

  • C'mon Daniel, that would be the last nail in the coffin. After all those news from today, this is exactly what was missing.
  • A source within MS has eluded to the fact that Surface won't be around in 5yrs. It is highly likely that this will happen given the source. It is sad.
  • Where would the PC business be without the Surface line inspiration? Microsoft will end up having to show PC manufactures, 'how to make a good Windows on ARM PC'.
  • 5 years is a long time... hopefully Mixed Reality would be pervavsive at that time... also there would multiple new innovative form factors for PC... it would be a sad world if they were still making surface laptops at that time :)
  • I get the feeling they'd have no meaningful presence is consumer space in another 5 years...purely enterprise sevices company... At that time Google, FB and Amazon (and Chinese giants Baidu, Tencent and AliBaba too?)  would be so powerful becuse of the scale of data they have access to...  My crazy specualtion....they'll be forced to merge with apple (which has no meaningful presence in enterprise market) in another 5-10 years! Can't wait to see what happens!
  • WApplesoft
  • Micrapple? (Hehe!)
  • "Washington State's Initiative 502 (I-502), which decriminalizes recreational marijuana, was voted into law in November 2012. The new law allows the creation of a licensed and regulated system of marijuana production and distribution, similar to the state's liquor controls." Your source within Microsoft must be sneaking benefits of this law. Surely there will be the evolution of hardware, they may change a name but devices will be there. 
  • Was waiting for this article on windowscentral since the news started hitting other sites. :) But I don't think the main issue is perception. The main issue is Microsoft's lack of proper communication with fans and consumers. They have nixed multiple consumer products both good and bad. and they don't communicate about it. They pulled the plug off Lumia very very quickly. Many users specially in India, Brazil, Italy were taken off guard. I agree that as a company they might be doing good but I, as a fan for once will feel better if they do some communication. Otherwise, as others are saying it will be very tough to invest in any consumer device they bring in future. Anyways, personally I am going to be cautious for sure with MS's consumer tech now. Lets see how it goes. 
  • I agree somewhat with this and comments such as Nadella's Alan Kay quote, in particular "I think there's some truth to it", don't improve the company's ambiguity. Together with Daniel's last paragraph, it's challenging to be 'all in' with MS at the moment.
  • <p>I honestly don&#39;t believe a word that comes out of Nadella&#39;s mouth anymore. He&#39;s done nothing but spew lies for the past 2-3 years.</p>
  • Really?  He is being the change for Microsoft. 
  • Fact is, it's been proven Nadella lies....alot.
  • Proven? Got any sources on that?
  • I loved the original Zune app and sad that new avatar of ZUne got cancelled... I was going to get the pass after Conrtana speaker - Invoke gets released... Apparntly cortana would have Spotify it should be okay I think... But the amazing slowness of Microsoft in releasing and evolving products is just appaling... if they really wanted to compete in this space...they should have release multiple models speakers by this time...very disappointing ! Obviously it's key not for selling some stupid speakers, but putting cortana everywhere to get data that could help improve their AI! You get the feeling there is no can they expect developers and end users to support their platform?   
  • "if they really wanted to compete in this space" That's the thing, right? They don't wanna compete. I feel a company as big and as resourceful as MS can compete when they want but they just don't want to. Change in leadership and their ever increasing profit, nicely performing enterprise market make them even more lazy in consumer market. Personally, I feel next 10 months or so will be defining to say the least for MS's consumer presence. As a fan, I'd love them to be competitve again. Will take some seriours effort this time though. Lets see.
  • Daniel.... I watch alot of your reviews...and I get the impression that you prefer other razor hp Spector's ect. Over the surface I wrong?
  • I use Surface Laptop as my main laptop these days, so yeah, not correct. There's a reason why I bought the 16GB 512GB model. I use Razer if I want to game; and HP's are also great, but Surface Laptop is bae. I just try to not over-promote my own favorite hardware over other companies.
  • Deleting that dude's comment was wrong. He is an angry fan and he has the right to be angry and express his anger, whether his way of expressing is right or wrong is secondary. You are trying to find a logic in an angry guy's comment rather than looking at the big picture of people being angry with MS. That's just my view though. You definitely know better. P.S. I am an Indian as well and there is nothing bad in calling an Indian, an Indian.
  • Why the Laptop instead of the Pro 2017 or Book?
  • Pro is amazing and I use it often, but the display is just a smidge too small when I have a 14" one next to it to use instead. Surface Book is just too big/heavy compared to Laptop and while it's nice to have that GPU, I don't always need it. Moreover, having 7th Gen Intel is nicer than Skylake.
  • "A Surface Book "2" and an ARM-based Surface device, not to mention the rumored "Andromeda" hardware for mobile, are all on expected to be released by Microsoft in the coming year.""
    Wait a minute... These three products, especially the latest, can you explain this comment?
    Is Windows Central STILL "counting" on a Mobile Surface device running Windows to be released sometime next year? What you wrote leads me to believe that you speculate a "Very Mobile Surface device" is in development as we speak... Did I read you right?
  • The more I read your articles and comments, the more I appreciate your professionalism. It's nice knowing that when I read your articles; they are pretty honest and line up with facts, not personal bias.
  • @sully9088, I agree. Daniel and team do a great job. Daniel in particular is remarkably objective.
  • Daniel, How's that Alcantara holding up ? Thinking of the 512GB model myself. I'm a long long time Macbook user that's looking to change. Love my Surface Pro 2017 but need more screen real estate. Any big -VE's ? I certainly hope MS don't kill off this line of sexy, innovative products Chris    
  • Microsoft should never abandon it's surface brand. I strongly feel it's going to make a huge impact on the market. The next iteration of devices would be the best and beast. Hope for the best and surface had already created a lot of good impact on its users.
  • said everyone since the orginal surface came out!
  • True, but Microsoft has already been successful with Pro 3 and 4. Now if Pro 2017 and later are successful, that remains to be seen. Same for Laptop, SurfaceBook and Studio.
  • This next earnings call will probably be extremely important. If sales are down it lacking after the release of the laptop and Pro, I don't see them sticking with it.
  • As long they don't lose money, like mobile, I think they will keep doing it to push innovation for the PC/laptop market.
  • The thing is the surface is a hit with business customers. My company sells dell and Hp computers to our customers but we are finding a lot of the site guys are getting the surface. For me the issue with the surface is the price I think they need to look at a lower cost device but for the work place I also don't think the surface line is aimed at joe public but the business side. Microsoft are in a massive transition at the moment imo and I believe tbh Xbox X will be Microsofts last attempt to do well in the console market and if it fails to gain market share on the PS4 pro I fear it could be there last. I also don't see any windows mobile device coming again to. I feel Microsoft want to be all subscriber based and make there money this way with Windows 10 also becoming free.
  • surface is and was needed to show off windows, and I think any copies of their product is more than welcome. They need some premium products because of Apple. ... but I really hate that they are just jumping over to next boat and leave the other one for sinking.....  
  • It's called being a responsible business.  Change or die, especially in the fast moving world of tech.  Just ask the likes of DEC, Data General, Palm, etc.  IBM faced their own reality and morphed primarily into an Enterprise services company, though they still continue to develop/promot mainframes and their mainframe-like UNIX world of AIX.   Unless you're Apple or Samsung and have legions of loyal fans, you're in a low-margin consumer space, which for them is just not worth the time and resources.  I don't blame MS one bit.    
  • The Hit Refresh guy uses an iPhone Pro. Do you expect him to use a Surface Pro or an iPad Pro ?
  • He uses a Surface Pro, actually. It's well known. Also, no one who is serious uses an iPad Pro. You know this, you're just trying to be an edgelord.
  • Your statement reminds me of Balmer circa 2007.
  • Your statements remind me of you circa always And I get the iPhone reference
  • Lol!
  • It's funny because looking back, Steve Ballmer said that no one will buy an iPhone, and here we are. Karma.
  • That was the entire point of bleached's comment.   That being said,  I own an ipad,  and would NEVER use it for "serious" work.  But it kills the surface at being a true tablet!  Why?  because of apps!
  • When I started writing my comment, his comment wasn't there yet 🙂.
    As for iPad, I'm not a fan of Apple products, but time proved me that things change. Who knows how powerful will become in a few years those light products as iPad or Pixelbooks. I really think that Apple and Google are testing internal to unify OSs to target the "serious" work. We'll see...
  • What apps lol? You want mobile apps on pc like surface? Ever heard of bkuestacks? There you have the whole content of Android world lol
  • I use memu but it's clunky and ****** on is bluestacks.   It hack job of a solution to the problem.  and Ipad apps are optimized for IPAD.  Try using texture on B/S or Memu and they are extremely clunky in operation.  Just like the surface is a true tablet.   I know...I owned them.
  • Still I don't get the need for childish apps on fully capable PC lol. If there is something I would really need, then bluestacks would do just fine. 90% of so called apps are web ports anyway so why bother with an app. I really don't get this. But ok... I respect that others might thing different. I just like all in one solutions and pure tablet is a complete waste of money for me as it does nothing better than a phone...
  • Spoken like a true fanboy @sefin.  NONE of the apps I use are "childish" please...try your close minded thoughts elsewhere.  Furthermore,  NO....apps on MS are web ports.  Apps on IOS and Android built for Android and IOS and are fully developed for said platforms and NOT web wrapper garbage you download on windows.
  • What Ballmer actually said was that no one would buy an iPhone that was $500 and still subsidized with a 2-year contract. He was correct, and Apple quickly dropped the price to $200 shortly after launch.
  • He was wrong actually, people will buy a $1000 iPhone.
  • I rather use $600 for charities and get a phone worth $400. People are insane to buy $1000 phone unless it can replace a PC.
  • I spent almost $900 to get a Nokia N95. Amazing product at the time
  • It'll be gone. Same with Windows. Microsoft will just focus on it's Azure program and Office. That's where the money appears to be according Satya. Even though Amazon and Google have taken the reigns from them in those areas too. Microsoft is just becoming more irrelevant because of their lack of interest in consumers. I see Xbox being spun off to it's own, while Microsoft focuses on "enterprise" even though that will be dictated by it's employees who are consumers at the heart.
  • Nothing wrong with following the money...
  • Lol seriously. The main goal for a company like Microsoft should be to stay relevant AND make money. They are only doing the last. People will start using google/amazon/apple alternatives for whatever Microsoft is left in the near future. People who are in these ecosystems won't use Microsoft products. All these Microsoft apps that they are launching on android and ios will be terminated within 3 years. Then Microsoft is completely gone from the face of the consumer market. They are making horrible decision after horrible decision. Mark my words.
  • So crise, what makes you thank that MS must "stay relevant" relevant to the consumer?  They owe you nothing.  Jettisoning low-margin lines of business makes perfect sense from a bottom line perspective.  
  • Wrong if it's a short-sighted perspective.
  • As far as I know amazon is ahead of azure but Google is pretty behind azure... :)
  • Every computer on campus runs Windows 10... You think that's not money in MS's pocket?.. Get real.
    At least Windows is safe.
  • You're not paying attention if you think "Windows is safe". The government has a back door into it. Wake the f**k up.
  • OMG.. Chill out, man. Stop panicking. Lol. Listen to yourself. None of this stuff is that serious. Everything will work out one way, or another. It always does. That's life, man.
  • All those realignments are a part of big corporates. I believe Surface to stay for the time being. At least the branding is already established.
  • I don't think Microsoft will cancel the Surface line in the near future. But I do think they will cancel some Suface products.   "Nadella notes that to create new device categories with new software experiences they need to do that themselves."   And they did. The thing is: does Microsoft need to continue to make that hardware once the category is created and embraced by their OEM partners? I'd say that the answer to that would be no.   So, going forward, what do I expect Microsoft to cancel? The Surface Laptop and the Surface Book. Let's think about it: - Surface Laptop: it has no reason to exist other than to try to make Windows 10 S a thing. Well, chances of that ever becoming a thing are slim so, in the end, we're left with just a nicely built Laptop that's no match for the laptops other OEM partners are doing. Besides, during the presentation of the Surface Laptop, Panos Panay clearly presented it more as a "fun project" for the Windows loyalists who helped the Surface brand grow more than anything else. He said something along the lines of "Our fans kept asking for a Laptop so we thought, why not make one?". The Surface Laptop fulfilled its purpose. It doesn't create any new category. As such, I wouldn't expect a Surface Laptop 2.   - Surface Book: The Surface Book is really just a beefed up Surface Pro with a different approach at a keyboard when it comes down to it. And between the Surface Pro and the Surface Laptop, it now has very little reason for existing. Not to mention it was far from a commercial success for Microsoft and didn't manage to create a new category at all. Mainly because the "Laptop that can become a tablet" had already been created by the Surface Pro. There are therefore very few reasons to keep the Surface Book alive. That *could* also explain the absence of a Surface Book 2. What exactly could the Surface Book 2 do that the Pro didn't do already? Remove the horrible hinge? That's not enough, really. And then there's the demand for it. Unlike other Surface products, the Surface Book had a far more limited release worldwide.   These are the two products I would expect Microsoft to put an end to.   As for the Surface Studio...that one is so niche and so limited in its availability that I think will get some sort of transformation. Most people (myself included) think the Surface Studio was an absolutely gorgeous display limited by its very unimpressive hardware. I think Microsoft *may* eventually ditch the "PC" part of it and transform the Surface Studio into a "Monitor that can replace your canvas". Currently the canvas on the market are just that: canvas. They still require a separate monitor. Such an evolution of the Surface Studio would make it more appealing (because people using it already have more powerful desktops than the one on the original Studio) and, again, push forward Windows inking capabilities.   The Surface Pro I believe they'll continue because they're using it to push their inking solutions (as well as things like fanless core i5 devices etc). And it's the poster-child of the Surface brand. If for nothing else, that alone will probably ensure it'll be the last Surface device to be eventually discontinued.
  • 🖒🖒
  • No certainties with MS. None.
  • I partially agree with your post, I do think that Microsoft should and will streamline their Surface Line, but I don't think it will be as drastic as you pointed out. Yes the new categories were created and they should focus on more innovation and leading the way for their partners.... HOWEVER Even though the Surface Book was not as huge success as the Pro is, remember it took 3~4 generations for the Pro to actually become a "thing".... the Book is a new concept and I totally disagree on your definition of it.... I used the Surface Pro 3 for work for almost a year, and I got a Surface Book of my own after that, and to be honest, the user experience is completely different, and it is basically just as they were designed for... The Pro is a Tablet that can become a true laptop, and the Surface Book is a laptop than can become a tablet occasionally The Surface Pro was really inviting to use as a tablet, specially since the touchpad was mediocre and the kickstand is awesome, however with the Book, I only use as a tablet when I truly need to share something, draw, or consume media from my bed... otherwise it's a Laptop with a touchscreen for quick Inking. In my opinion they should stick with the Pro, Book and Studio but I agree that they should transform the Studio in a Monitor Canvas... it would make much more sense for a lot of people, and it would also make it less expensive, even if its a premium Monitor. But the Pro and Book line are marked differenciators. In my eyes the hinge is an engineering marvel and I love the industrial look, though I understand why it doesn't get universal appeal.   They should stick to their promises and only release hardware when true innovation comes along and have something different.... the "Performance Base" should have been delayed until Kaby Lake...   
  • The Surface Book is hands down the best laptop I have ever owned (business use, not games).  The hinge is brilliant.  The dock, however, is sketchy.  It's a premium product and that will affect sales volume, but it really brought the concept to a new level. 
  • If anything, the way how consumers perceive them is most damaging. They may have good ideas, but they *almost never* follow through. And Microsoft is hit by this notion in product and services sales. Therefore, it's safe to say we're at a point in time where anything Microsoft related, sans Windows on desktop, Office and Azure may be dropped at any point. Including UWP.
  • What if these comments by Dell and Lenovo are recommendations or even threats instead of prophecies?
  • I think that happened back in 2012/2013 too when Surface first happened. I don't see them doing anything different this time.
  • Both companies have partnered and delivered Azure Stack appliances last month.  They aren't threatening anything.  This is prophecy.
  • the surface mini was canceled. not far fetched. Satya was all about the ultimate mobile device, now look at the ecosystem with the hope that PWA takes off.
  • It was canceled because the mini RT would've failed hard.
  • As noted, Windows RT was a bad bet and canceling something with like 1GB of RAM back when tablets were waining in the market was the right one.
  • my point is that a "surface" product was canceled, albeit before it saw the light of day.
  • Sure, but it's weird they didn't cancel Surface Laptop if they were pushing out Surface as a brand. It's literally he most expandable one of the lineup today.
  • Cancelling or discontinuing a product and terminating an entire product family are two different things.  Dell discontinued the Dell XPS 10 tablet, but the XPS family still remains.  
  • That's Dell, we are talking about Microsoft, which you know is an entirely different story.. Breaking news: Looks like the Aristotle by Mattel has been canceled. Dan can you preface the story on the Aristotle with " Threw in the towel" I did like how you referenced it in the Groove headline.
  • I realize that we are talking about Microsoft, but you are speaking of a single product in a product line.  Products get cancelled and discontinued all the time. I'm simply pointing out that you cannot refer to one product cancellation and imply that the entire product line will also be shuttered.
  • When the CEO of a company uses logic like, "Did not see the need to have a 3rd ecosystem" You most certainly can use that to understand the thought process. And so questions get asked. Is the Surface laptop/book/pro in the top 3 or top 5 sellers in its category? True, it does not mean a product was be cancelled but you still have to ask the question.
  • WTF. 'One' product. Are you asleep? The one product is just the latest in a string of products cancelled before or after release.
  • Nadella doesn't have any idea what a "ultimate mobile" device looks like and, chances are, whatever he comes up with will be greeted with a universal "meh" by customers.  Why? Because it will miss the mark on a number of areas (because Microsoft is now SO disconnected from customers this is all but assured) and people are now so entrenched in the iPhones and Galaxy devices they won't even it this thing as much chance as they gave Windows Phone.
  • "iPhones and Galaxy devices..." Um, you do realize that globally, the majority of d