Microsoft's latest Surface tablets don't dazzle industry analysts

Sticking with larger displays keeps prices up, and Microsoft still has too few Windows RT apps

Microsoft's second-generation Surface tablets didn't dazzle analysts on Monday, even with improved processor speeds, better cameras and longer battery life.

Both the new Surface 2 and Surface Pro 2 will be available on Oct. 22, with the Surface 2 starting at $449 and the Surface Pro 2 starting at $899.

Analysts said Microsoft still must wrestle with tricky issues such as a small installed base for Windows tablets, too few apps for Windows RT and overall prices that are too high compared to many Android tablets, even though Microsoft kicked in freebies such as Skype and cloud storage.

Also, both new tablets have the same 10.6-in. displays used in the original two tablets announced last year, which means that Microsoft's costs to build the Surface tablets are kept fairly high when compared to smaller tablets. Meanwhile, the overall tablet market is decidedly moving to smaller sizes.

In keeping the 10.6-in. displays, Microsoft is espousing an even greater focus on worker and student productivity, as compared to selling them primarily as a means of consuming content.

Consumption of video and other content is generally emphasized in the many models of smaller, less expensive -- but more popular -- Android tablets with the 7-in. to 8-in. display size as well as the 7.9-in. Apple iPad mini.

With this strategy, Microsoft is essentially saying that a larger tablet like the Surface Pro 2 or Surface 2 is better for producing and editing documents and spreadsheets, and will function more like a laptop.

Microsoft called the Surface Pro 2 a "true laptop replacement," while dubbing the Surface 2 "the most productive tablet for personal use ... [that] offers all the entertainment and gaming capabilities you expect from a tablet, along with the ability to get work done."

The biggest problem with Microsoft's strategy is that the group wanting that larger tablet running on the Windows platform is a small group, indeed. Gartner expects 90 million Android tablets will ship in 2013, 107 million on iOS and just 3.7 million on Windows.

"I believe Surface 2 will help Microsoft gain tablet share, but that comes from a very small base today," said Patrick Moorhead, an analyst at Moor Insights & Strategy. "Both new tablets offer improvements and unique features, but neither fundamentally changes the competitive landscape. The tablet market has swung to a low price, 7-in. to 8-in. form factor with thousands of speedy and relevant apps."

Microsoft on Monday noted it has increased the number of apps useful for Surface 2 from 10,000 a year ago to 100,000 today. But that's still a fraction of the apps available in Google Play and App Store, analysts said.

Microsoft's message of productivity will likely work best with enterprise workers using the new Surface Pro 2 tablets, which can also run legacy Windows apps, analysts said.

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