Can Microsoft Corporation (MSFT) Save the Surface?

How Google Inc (NASDAQ:GOOG) does it

Google Inc (NASDAQ:GOOG) decided on an interesting tactic in producing tablets: It has partnered with other hardware companies to create devices. The Nexus 7 was produced in partnership with Asus . And the Nexus 10 was built in cooperation with Samsung . Despite varying devices and manufacturing partners, the Google Inc (NASDAQ:GOOG) Play app store is a popular ecosystem. While Apple’s App Store currently has 878,337 active apps available , Google Play has more than 1 million apps . By comparison, the Windows 8 Store only has 100,000 apps .

What’s interesting is that Google is not rushing to market any tablets from its Motorola Mobility unit, which the company purchased for $12.5 billion in 2012 . But Motorola is and will be a growing revenue source for Google. Although products from the Motorola division do have lower margins than that of advertising , the company derived 8.2% of revenues from that division in 2012 . That came out to $4.1 billion last year. Eventual Motorola tablets will be geared toward Google-based revenue like search advertising. That means the company can expect more growth from its Motorola unit to expand the $50 billion revenue tally from 2012 .

In the end
The lack of developer interest seems to be a problem for the Surface. Microsoft recently dropped the price of its high-end Surface RT down $100 to $799 . But $799 is just too expensive for a tablet. That’s perhaps even too expensive for a Windows-based laptop.

If Microsoft wants to compete with Apple and Google on tablets, it needs to make a device that developers want to make software for. Could Microsoft’s purchase of Nokia help? It might, if the company can leverage Nokia’s technology for innovative purposes. Microsoft needs to begin taking bigger risks on its tablets. The wearable technology era is coming, so Microsoft should think about how future mobile devices will fit in with that new paradigm. Just trying to catch up with what Apple and Google are doing is not going to cut it. Microsoft needs to innovate in a way that can change how people think about mobile devices. It might be the only way to save the Surface product lineup.

The article Can Microsoft Save the Surface? originally appeared on Fool.com is written by Daniel Cawrey.

Daniel Cawrey has no position in any stocks mentioned. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple, Google, and Microsoft.

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