Microsoft Surface

In 2013, Microsoft Took Its First Steps Toward a Devices Future

With Lumia and Surface, Microsoft is nicely poised for the future

Looking at the calendar this morning, I had to do a double-take: Suddenly, 2013 is just about over. And that means I'm a bit behind in my end-of-year wrap-ups. But in preparing a list of the best technologies of 2013 for a coming article on the SuperSite for Windows, an interesting trend arose. Some of the key hardware devices that shipped this year came from Microsoft and Nokia, which is soon to be part of Microsoft. And this bodes well for the devices part of the Microsoft's devices and services future.

Related: In Final Letter to Shareholders, Ballmer Spells Out Microsoft's Strategy

Frankly, the devices side of "devices and services" has been the weak link since its inception. I've never had a hard time imagining Microsoft bringing its core on-premises solutions to the cloud, and all one has to do is look at services such as Office 365, Windows Intune, and Windows Azure to see how successful this endeavor is.

Devices, however, are a different story. Although Microsoft has obviously had a successful PC accessories lineup for many years, and has seen some consumer successes with Xbox, the company has never really been known as a hardware company. But this has been changing over the past year, and while many have questioned the presumably Apple-like strategy of Microsoft selling its own PC hardware, I think it makes plenty of sense.

The transition, of course, has been painful. Microsoft's initial PC hardware, the first-generation Surface RT and Surface Pro, didn't sell particularly well. And through 2012, at least, Nokia made precious little headway flogging Windows Phone handsets.

Related: In Drive to the Bottom, a Winning Strategy for Nokia

Equally troubling is that most of Microsoft's biggest PC-maker partners have released Chromebooks running Google software and services over the past year. There's been a lot of controversy around this, with questions about whether the sudden embrace of what Microsoft has humorously described as "a brick" when offline represents a natural move to heterogeneousness or whether these firms are somehow punishing Microsoft for making Surface.

I don't want to focus too much on Chromebook. While some PC makers have indeed voiced concerns about Microsoft's move from partnering to coopetition, most are actually pretty sanguine about the change. (And the most vocal opponent of Microsoft's Surface strategy, former Acer CEO J.T. Wang, was ousted from his company recently anyway.) I do think that Chromebook is for the most part just a small part of a broader "perfect storm" that is reshaping the personal computing market, rather than a retaliatory strategy.

More important, I think, is that Microsoft—and Nokia, which again will soon be part of Microsoft—got so much right, hardware-wise, in 2013.

Microsoft's second-generation Surface devices, Surface 2 and Surface Pro 2, are huge improvements across the board, in part because both run the feedback-driven Windows 8.1 release. (Surface 2 utilizes the RT version.) What this means is that each device's worst problems were fixed. So Surface 2 suddenly performs quite speedily, whereas its predecessor was a dog. And Surface Pro 2's real-world battery life finally moves from the "miserable" category of its predecessor to "absolutely acceptable." (And with an optional Power Cover keyboard, coming soon, it moves into the vaunted "all-day battery life" category.)

Bolstered by an impressive new accessories lineup that includes backlit Type Cover 2 and Touch Cover 2 keyboard covers, a new desktop dock for the Pro devices, and a couple of oddball surprises such as a strange tubular wireless adapter for the keyboard covers—see my "Microsoft Surface 2: The Complete Guide" for the complete rundown—Surface is suddenly mature and capable. And folks, when you consider that the first generation was borderline laughing stock, that's not just a big change. It's a profound change.

Some seek further maturation of the Surface lineup—the expected Surface mini was pushed back to 2014, and of course some of us would like bigger, Ultrabook-type devices—but 2013 was a watershed year for a product line that many considered on the ropes. Microsoft has established itself, and quickly, as a firm that can make high-quality hardware. And while I don't want to get too far ahead of myself, it's worth noting that these new Surface devices are selling well and are in fact selling out in some places.

On the phone side, we've seen similar maturation. Nokia took a fairly diverse handset line and exploded it out into every conceivable product category imaginable. There are low-end phones for emerging markets (and for those in mature markets who want second devices or handsets for children), mid-range phones for the volume part of the market, and an impressive lineup of high-end devices that includes such esoteric models as a Lumia 1020 with a 41-megapixel camera and, more recently, a 6-inch super-sized phablet, the Lumia 1520, that provides a full 1080p of resolution, the same we see on the much larger Surface 2 and Surface Pro 2.

A whole lotta Lumias

Nokia's strategy has given Windows Phone a much-needed shot in the arm. After languishing in the market for a few years, 2013 saw Windows Phone grow almost exponentially faster than the rest of the market, and although it's still trailing Android (80 percent) and iPhone (12 percent) with just 4 percent(ish) of market share, something very interesting has happened. In certain markets all around the world, Windows Phone is outselling Apple's iPhone. It's happening in Europe, Latin and South America, and Asia. And while the little platform that suddenly can is still a ways from challenging the market leader, it's absolutely starting to breathe down Apple's virtual neck on a global basis. If current trends continue—and no, it's not April Fools—Windows Phone could actually catch up to iPhone in just a few years.

Here, too, I don't want to get too far ahead of myself. For now, I can say this: Thanks almost entirely to Nokia, Windows Phone turned the corner in 2013. And with the firm's devices and services businesses being purchased by Microsoft any day now, the one-time software giant suddenly has very credible devices targeting many of the key market segments. This time last year, we couldn't make such a claim.

Some might want to pile the Xbox One into this 2013 success story, and with more than 2 million consoles sold in just 18 days, what the heck: It's off to a great start too. But Xbox One has some important maturing to do of its own, and there's no real PC-to-console integration to speak of, a strange omission when you consider that the Xbox 360 at least had basic capabilities. But I wouldn't be surprised if the genius of Microsoft's decision to base the Xbox One on traditional, Windows 8-based PC parts becomes clearer in 2014. After all, Windows is the most versatile software Microsoft has ever made. And getting it into the living room could be the start of something very interesting indeed.

But that's for next year.

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