In 2012, software giant Microsoft (MSFT -1.32%) released its own personal computer hardware under its then-new Surface brand. The initial lineup consisted of two devices -- Surface RT, a lower-cost option that incorporated an Arm-based processor, and the Surface Pro, which used a relatively high performance Intel (INTC -3.67%) processor.
The Surface RT wasn't that successful, nor was its successor, the Surface 2. Microsoft launched a successor to the Surface 2, called the Surface 3, with one of the main improvements being a shift away from an Arm-based processor to a low-power Intel Atom processor in 2015. That product was discontinued at the end of 2016, though, which meant that Microsoft was out of the lower-cost 2-in-1 personal computer market -- until now.
Image source: Microsoft.
On July 9, Microsoft finally launched a spiritual successor to the Surface 3, known as the Surface Go. Let's take a closer look at this device and try to discern Microsoft's underlying strategy.
Lowering the price bar
The Surface Go starts at $399 -- a full $100 cheaper than the $499 which the Surface 3 debuted at. A lower starting price should make the device more accessible to consumers than the prior-generation Surface 3.
That lower price comes at a cost, though. The Surface Go uses a relatively weak Intel Pentium Gold processor. While that chip should be substantially faster than the Atom processor that powered the Surface 3, it's still nowhere near as fast as the Core i5 and Core i7 processors found in Microsoft's higher-end Surface Pro devices. This shouldn't be surprising, however -- pricier computers tend to get faster processors while cheaper ones have to make do with slower processors.
In addition to the less-beefier processor compared to the 2017 Surface Pro, the Surface Go has a more diminutive screen, less (and slower) storage, and can't be configured with as much system memory.
As the saying goes, you get what you pay for, and while the Surface Go costs less, you definitely get less, too.
Microsoft's strategy
Microsoft's hardware business is certainly more than a hobby for the software giant. The company seems to be investing significantly in iterating on its Surface product line and has even broadened its portfolio significantly from inception to include the Surface Book (a high-end 2-in-1 notebook) as well as the Surface Studio (a powerful all-in-one desktop).
What's interesting, though, is that Microsoft has focused in recent years on attacking the high-end of the market by putting out no-compromise halo products. Those products have not only served to generate a non-trivial amount of revenue for the company, but I'd argue that the Surface brand is reasonably valuable today.
Microsoft's strategy with the Surface Go might be as simple as trying to leverage all of the brand equity that it built by releasing halo products to sell a more affordable, mass market product in a bid to accelerate revenue growth in its Surface business. After all, since Microsoft simply doesn't address the low-end of the personal computer market with its current Surface product portfolio, nearly every one of the Surface Go products that it does sell should deliver higher-value incremental revenue.
Another thing to keep in mind is that if the Surface Go gains a reputation for being a quality product, it could serve to further enhance the value of the Surface brand. The stronger that brand, the easier it is to compete for consumer dollars.
