Why Surface won't be submerged by Microsoft's Nokia acquisition
Don't let all the talk about service synergies and sales teams fool you: Microsoft gobbled up Nokia to ensure Windows Phone's ongoing survival and bolster the "devices" portion of its newly refocused "devices and services" business.
But wait! Hasn't Microsoft already spent more than $1 billion in resources on an in-house device brand? Indeed it has. And while the newly minted marriage between Nokia and Microsoft almost certainly crushes any hope for a Surface-branded phone—at least in the near future—it doesn't mean the end of the Surface line.
Buh-bye, Surface phone
Let's get the low-hanging fruit out of the way first.
Microsoft has said in the past that it has no immediate plans to introduce a Surface phone. The Nokia purchase solidifies this position—and that's not necessarily a bad thing.
"I'm not even sure what the value of a Surface brand would be on smartphones," says Ross Rubin, the principal analyst at Reticle Research. "First of all, 'Surface' implies a larger area on which to do something and get things done. And of course, one of the things the Surface tablets struggle with is the focus on the add-on keyboard—which is without a doubt its signature feature. But if you don't need a virtually omnipresent keyboard, it's a double-edged sword… and we've seen significant dwindling of phones with mini-keyboards, like the BlackBerry Q10."
But beyond the Surface phone concept alone, Rubin's sage words drive home why the Surface won't be sucked into the abyss just yet.
One Microsoft, two brands
While Microsoft touted "One brand, united voice" after announcing the Nokia acquisition, mashing everything together under a single brand simply doesn't make much sense yet.
It might make sense if Microsoft bought all of Nokia. Nokia's a much more recognizable name than the fledgling Surface hardware brand—but Microsoft bought Nokia's devices business, not the Nokia name itself. The Lumia brand (which Microsoft will presumably soon own) isn't as well-known as "Nokia." What's more, the Lumia brand's bold design and colorful exteriors target a whole different audience than the stark, VaporMg-clad Surface slates.
"It's targeting a very different audience," says Ben Bajarin, the director of consumer technology at Creative Strategies. "A product like a Surface, or even a PC or hybrid or two-in-one, targets a very different audience that what Lumia's been doing with the colors."
Simply put: The Surface is for work—despite what Microsoft's fast-cut, dubstep-tinged advertising blitz may have you believe—and the Lumia line is for consumers. And while the line is growing increasingly blurry thanks to BYOD, there is still a difference between the two.
"Microsoft may try to repurpose Surface to something that's more keyboard-focused, where Lumia becomes its brand for smaller tablets, where keyboards make increasingly less sense and there's perhaps even more synergy with the smartphone line," says Rubin. "Surface could evolve to become, basically, Microsoft's PC [and PC replacement] brand."
If nothing else, Microsoft and Nokia are both said to be in the advanced stages of releasing new tablets, in the form of second-gen Surface slates and Nokia's first foray into tablets. Given how far along the companies are said to be on those products, both Rubin and Bajarin expect them to launch under their respective Surface/Lumia brands, rather than a possible newly formed line.
All for one, one for all
But even if Lumia and Surface stay separate yet equal, the Nokia acquisition will still pay dividends for the Surface line.
"The quality of the Nokia Windows Phone experience will give more incentive to the Surface team to double down on Microsoft-owned tablets," predicts Forrester analyst Ted Schadler.
The acquisition should have much more tangible benefits for Microsoft's new Devices division, as well.
"Nokia has some very smart hardware people," Bajarin says. "They have good hardware engineers. They have good hardware designers. They have people who are very good at those things. Microsoft does not have people who are good at those things. [Microsoft] has acquired quite a lot of hardware expertise to manage and integrate into their mobile device division."
And beyond that, Nokia's supply chain borders on legendary. Microsoft can lean on that to bolster its small Surface line, both for manufacturing and for expanding Surface to more countries and more retailers.
Yes, the phone is the key to everything, but the Nokia acquisition pays dividends far beyond simple smartphones. The manufacturing prowess that Nokia brings to the table, merged with Microsoft's deep pockets, opens up many doors for Lumia, Surface, and Microsoft's entire push into Devices.
"They have a lot of different paths they can take for hardware," says Bajarin, "And I can see them getting into all kinds of different hardware."
And with that, we can't help but ponder the plethora of hardware possibilities. Sure, a productivity-friendly mobile display would pretty obviously fall under the Surface brand, but like a Surface phone, the long-rumored Surface smartwatch could very well die an ignoble death at the hands of Lumia.
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