Microsoft Corporation (MSFT): Surface Book 2 May Ditch the Tablet Form

Surface Book 2 - Microsoft Corporation (MSFT): Surface Book 2 May Ditch the Tablet Form

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When Microsoft Corporation (NASDAQ:MSFT) released the Surface Book 2-in-1 notebook PC in late 2015, it turned a lot of heads. Its signature dynamic fulcrum hinge and detachable display were impressive.

Microsoft Corporation (MSFT): Surface Book 2 May Ditch the Tablet Form

Source: Shutterstock

Apparently, MSFT’s first foray into building its own PC was not impressive enough to generate sales, though.

According to a report from DigiTimes, the company’s Surface Book 2 will arrive in the next month or so. If the website is correct, the Surface Book 2 will arrive as a traditional laptop — no removable tablet screen — and will feature a significantly lower price in an effort to jumpstart the numbers.

The Surface Book

When Microsoft decided to take the next step into the hardware game by building its own laptop, it wanted to enter the market with a premium device. One that would show consumers and other manufacturers what a flagship laptop could do with Windows 10.

The key features on the Surface Book were its removable display — able to be used as a standalone Windows tablet — and the dynamic fulcrum hinge that made the transformation possible. Although it was an engineering marvel, the hinge did have the downside of making the laptop thicker and a gap allowed dirt to get into the keyboard when closed. When MSFT refreshed the device in late 2016, it was not the Surface Book 2 some had hoped for, but a spec bump with a slight tweaking on that hinge.

Surface Book Sales Failed to Materialize

While Microsoft accomplished the goal of making its mark as a premium PC vendor and won kudos for the Surface Book’s innovative design, this didn’t pay off with sales. The MSFT 2-in-1 laptop caused some overlap with the Surface Pro — a tablet with an optional keyboard case that could turn it into a laptop. With a price range of $1,499 to $3,199, it was also expensive, which didn’t help.

The company bragged about converts from Apple Inc.’s (NASDAQ:AAPL) MacBook laptops, especially when the MacBook Pro launch stumbled. But it was always careful to refer to Surface as a platform, instead of specifically saying those disappointed Mac fans switched to a Surface Book.

DigiTimes says the company shipped just 500,000 Surface Books in 2016. Apple, in comparison, sold nearly 5.9 million Mac laptops in the first half of 2016 alone. PC World put it this way: “it’s unclear whether the Surface Book is unpopular or simply niche.”

Reports of poor Surface Book sales had analysts questioning whether MSFT would even bother releasing a Surface Book 2.

Surface Book 2

Based on information from MSFT’s supply chain, DigiTimes reports that the Surface Book 2 is not only a go, but that it has entered mass production. Those sources believe Microsoft will announce its new laptop in the coming weeks.

They also claim it is a true laptop, not a 2-in-1 form factor. Dropping the dynamic fulcrum hinge and detachable display addresses three key issues with the original Surface Book: confusion with Surface tablets, cost and thickness.

DigiTimes’ sources say the Surface Book 2 will be a traditional, clamshell style laptop with a 13.5-inch display and magnesium alloy case. With a $1,000 starting price, it would undercut most Apple laptops, although it would still be seen as a premium Windows laptop. Those sources are projecting shipments that could triple the original Surface Books’ numbers, hitting as high as 1.5 million units for 2017.

How Likely Are the Surface Book 2 Rumors?

As usual, reports originating from unnamed supply chain sources must be taken with a grain of salt. The Surface Book 2 report seems credible. If the new MSFT laptop is in production, the information is likely to be fairly accurate at this point. DigiTimes is also the outlet that first broke the news about the MSFT Surface Studio. And the overall strategy of pivoting to a traditional laptop form factor makes sense.

Microsoft took several attempts to get the formula right with its popular Surface Pro tablets. It’s only natural it might shake things up with the Surface Book 2. Will a lower price and ditching the detachable screen pay off for MSFT? Or will the Surface Book 2 get lost in a sea of lookalike Windows 10 ultrabooks? If DigiTimes is right, we will find out in the next month or so.

As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.

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