Microsoft's Surface Might Not Be Doing So Well

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Microsoft's Surface tablet started out pretty strong. The base model sold out in the first day of pre-orders. After that, Steve Ballmer said sales were off to a "modest" start. Modest apparently means abysmal according to a report from one analyst.

Forbes reports that Detwiler Fenton, a Boston-based brokerage firm, published a note this morning that said Microsoft's Surface tablet is unlikely to sell more than 1 million units in the fourth quarter. In fact, the firm says that Microsoft has sold around 500,000 to 600,000 units. It notes that Microsoft's own internal projections were sales of 1 to 2 million.

So what's causing the lack of sales? The firm points to price and distribution. The first is obvious as the basic Surface RT retails for $599. It's too much for an untested product from a company that many don't associate with consumer technology. Even if the price was lowered, the second problem - distribution - would still hurt sales. The Surface is only available from Microsoft's Web site or one of the few dozen Microsoft retail stores across the country. It would do much better if the tablet was sold on other Web sites and retail outlets.

Interestingly enough, the firm says that touch-enabled Windows 8 laptops are the top performers this holiday season. They're easily outselling the Surface, and the firm has high hopes for the Intel-based Windows 8 tablets, including the Surface Pro, that are launching early next year.

It's an entirely different story with Windows Phone 8. It's already been reported that AT&T's Nokia Lumia 920 is doing much better than anybody expected. Detwiler concurs and says the devices are off to a strong start. The firm notes, however, that the devices aren't doing as well at Verizon where only the Nokia Lumia 820 and HTC Windows Phone 8X are offered.

So what does this all mean? At the moment, not much. Microsoft will have to lower its sales projections for Surface, but Windows 8 itself is pulling some decent numbers. Starting next year, Microsoft will have to start selling Surface at more locations beyond its own stores if it wants to have any chance of competing. A price drop for both the Surface RT and Surface Pro wouldn't hurt either.

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