Microsoft Corporation (MSFT): Will Sales Surface With This Device?

Microsoft Corporation (NASDAQ:MSFT) has had, shall we say, a lukewarm sales response to its Surface tablet computers that run on the Windows 8 operating system. This lukewarmness doesn’t just apply to the RT, but also to the Pro, though the debate is raging whether the lack of strong sales is blamed on the device itself or on the new OS, which had been known to cause some confusion and consternation among longtime Start-button Windows users and consumers.

And while Microsoft Corporation (NASDAQ:MSFT) is preparing to roll out its Windows 8.1 update – the one that will bring back at least something that resembles a Start button and will allow users to toggle between the Windows 8 tiled interface and the more traditional desktop interface – the company is still looking to work its existing IT and education channels to try to step up sales of the Surface, which reported only 1.5 million units sold through the March quarter of 2013.

In plain English, that’s not good. Microsoft Corporation (NASDAQMSFT) is working through its partners and existing enterprise and education channels to put more Surface tablets in users’ hands, and it is doing so by providing some value-added or discounted-price opportunities. The first leg of the stool is by allowing U.S.-based resellers like CDW and Softchoice to sell Surface tablets to existing enterprise customers.

Cyril Belikoff, director of the Surface division at Microsoft, explained the value behind using resellers in a recent blog post. “In addition to offering Microsoft’s extended warranty and accidental damage, resellers bring a variety of additional value-added services to the Surface family, such as asset tagging, custom imaging, kitting, onsite services and support, device recycling and data protection.” In the past, Microsoft had only sold its Surface devices through its own online store, its retail outlets or through retail partners.

Another step Microsoft wants to take over the next few months is to introduce a new developer program called AppsforSurface, designed to encourage development of key popular enterprise applications to be used on Surface and Windows 8. Citrix, Sage and Houghton Mifflin Harcourt are among the companies that have already signed on.

The third leg in this stool is where Microsoft Corporation (NASDAQ:MSFT) has traditionally conducted a lot of outreach and has become a dominant force – in education. Anyone not surprised besides us?

The big step Redmond is taking here is by slashing the price of its Surface tablets to cater to college students and schools. The normal retail price of $499 will be cut to $199 until the end of August, and this deal applies to 26 countries around the world not just the U.S. What do you think about this three-pronged program by Microsoft Corporation (NASDAQ:MSFT)? Do you think the weak sales are due to the product itself, or can it be blamed on the Windows 8 OS? Where do you think investors like fund manager David Einhorn (see his portfolio) stand on this? And do you think Windows 8.1 will help that situation? Give us your feedback in the comments section below.

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