Microsoft Doubles Down on Surface Marketing Despite $900 Million Write-down

Analysts Like Prospects for Next Generation of Tablets

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Undeterred by a massive write-down of its first generation of tablets, Microsoft will aggressively market its updated line of Surface devices after working to address numerous complaints, including weak battery life and meager app offerings.

"We will continue to spend substantially," Surface marketing director Robin Seiler said in an interview. She declined to specify how much Microsoft would spend to market Surface 2 and Surface Pro 2, which were unveiled Monday morning. Microsoft spent $191.8 million on measured media for the Surface since launching the product line last October and through July 2013, according to Kantar Media.

Credit: Microsoft

In July, Microsoft announced a $900 million write-down on excess inventory of its first generation Surface devices and slashed the price of its low-end Surface RT. In August, Microsoft switched Surface's digital consumer marketing to Publicis Groupe's Razorfish from Interpublic Group of Cos.' R/GA.

Microsoft plans to go after more well-defined consumer segments with the new line.

Ms. Seiler said Surface is ideal for creative professionals like filmmakers and video-game designers, corporate professionals and students.

"Surface is a productivity tablet, not an entertainment tablet," Ms. Seiler said.

Analysts attending the product unveiling said they expect the updated line to do better, especially at the enterprise level, after Microsoft addressed major shortcomings such as poor battery life. Microsoft corporate VP Panos Panay said at the launch event that the Surface 2 line had a battery life two and half times that of its predecessor.

"The biggest complaint about the Surface was battery life," IDC analyst Crawford Del Prete said. "When it comes to selling to enterprises, battery life is a nonstarter."

Mr. Del Prete said this improvement and Microsoft offering free international Skype calling to all Surface 2 and Surface Pro 2 customers will make the product more appealing.

Forrester analyst Frank Gillett said the original Surface confused consumers because it was positioned as a PC-like device and had a dearth of apps relative to other tablets.

"Surface was neither a fully-flexible Windows PC nor a tablet with all the apps," he said.

The second generation of devices, available for pre-order on Tuesday and widely available Oct. 22, will launch with 10,000 apps, Mr. Panay said. A Facebook app, which was noticeably absent from the first Surface, is currently being developed, he added.

Microsoft's challenge is to keep growing its app ecosystem and improve how its software operates across devices.

Ms. Seiler said marketing the Surface will gradually become less about the product and more about Microsoft as a whole.

The first year was about establishing Surface as a brand, she said. "We still have work to do. We're not even a year in yet."

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