Technologizer

Doing the Math on DigiTimes’ Microsoft Surface Shipment Claims

A notoriously unreliable Taiwanese tech site says that Microsoft wanted to sell four million Surface tablets in 2012.

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The temporary Microsoft Store in Times Square, New York on October 25, 2012, shortly before it opened for business.

Monica Chen and Joseph Tsai of Taiwanese tech site DigiTimes report that their sources in the “upstream supply chain” say that Microsoft is disappointed by the sales of its Surface with Windows RT tablets so far. The company had supposedly been ordering components with the expectation that it would ship four million Surfaces this year; now it’s allegedly slashing that figure back to two million units.

Now, this is DigiTimes we’re talking about. The same DigiTimes that reported that Apple was going to release an AMD-based MacBook. And an Intel-based iPhone. And a tablet with an OLED screen. And a bunch of other stuff which it never actually did release. Sometimes DigiTimes is right; sometimes, it’s right, but premature by a year or two; sometimes it veers off into Fantasyland. So I never assume that anything it reports is correct unless there’s other supporting evidence.

(And in this case, one unlikely-sounding tidbit which DigiTimes’ sources provided — that Microsoft might be forced to rush out the Surface with Windows 8 Pro tablet in December — seems to have been trumped by Microsoft reiterating today that Surface Pro will be out in January.)

Still, I’m fascinated by the question of how many Surfaces Microsoft hopes to sell — especially given that it’s only selling the tablets direct to consumers, not through major retailers and e-commerce sites. For a gizmo that’s generated so much chatter — and which Microsoft is advertising heavily, with national TV spots and subway ads galore in big cities — Surface is available from shockingly few outlets.

So I wondered: Is it really possible that Microsoft hoped to ship four million Surfaces this year? And if so, what would that mean for the company’s fledgling Microsoft Store operation?

Without Microsoft’s help, we can’t come up with any serious answers to this question. We can, however, spitball DigiTimes’ numbers around a bit.

At the moment, I count ninety retail outlets where Surface is available — a combination of permanent Microsoft Store locations and temporary pop-up stores, mostly in the U.S. with a few in other countries. The tablet is also for sale on Microsoft.com.

I have no clue what percentage of Surfaces will be sold at retail. But for this exercise, I need to come up with a number.

On one hand, Surface is the sort of product which you really want to see and touch before you plunk down your money. And Microsoft.com isn’t exactly Amazon; it’s not a site that most people think of as a place to buy computers or anything else.

Then again, many potential customers don’t live near a Microsoft Store, so if they want a Surface, they’ll get it on the web.

Just to pick a number at random — but err on the conservative side — let’s say that Microsoft expects that half of Surfaces will be sold online, and half at retail.

DigiTimes says that Microsoft initially intended to ship four million Surfaces by the end of 2012. Shipping computers isn’t the same thing as selling them to consumers. But let’s ignore that distinction and say that — in DigiTimesland, anyhow — Microsoft originally hoped to sell two million Surfaces at retail before the lights went out on New Year’s Eve. (It’ll throw our math off, but it was already anything but precise, and it’s about to get even less accurate.)

Two million Surfaces divided by 90 retail locations equals 22,222 Surfaces per store. Surface went on sale on October 26. That gives it 65 on-sale days in 2012, if we subtract Thanksgiving and Christmas as holidays. So to sell 22,222 Surfaces by December 31, a retail location would need to sell 342 of ‘em per day.

Different Microsoft Stores have different hours of operation on different days of the week, and most of them will presumably be open longer and longer hours up to December 23. Just to make up yet another number, let’s say that the average for the entire chain for the rest of the year is eleven hours per day. That would mean that a store would have to sell about 31 Surfaces per hour to hit 342 per day, or approximately one unit every other minute.

That’s a heck of a lot of Surfaces. On Black Friday, the busiest shopping day of the year, Piper Jaffray analyst Gene Munster monitored sales at the Apple Store in the Mall of America, the country’s largest shopping center. He counted eleven iPads being sold per hour. Which would mean that our mythical Microsoft Store selling a mythical 31 Surfaces per hour would need to be outselling the Black Friday iPad by nearly 3-to-1.

(Munster, incidentally, also reported that he didn’t see any Surfaces at all being sold at the Mall of America’s Microsoft Store, but he only monitored that shop for two hours — versus eight hours for the Apple Store — so that number doesn’t mean much.)

If DigiTimes’ notion that Microsoft halved its 2012 Surface sales estimate is true, and we continue on with the above scenario, the company doesn’t have to sell 31 Surfaces per hour per retail location. But it does need to sell 15 of them. That’s still more iPads than Munster saw being sold on Black Friday.

Just in case it isn’t clear: Many of the figures in the above exercise are made-up placeholders. But this much is factual: Hoping to sell millions of anything when you have only 90 retail locations sounds incredibly daunting. And I have trouble believing that even the most wild-eyed optimist at Microsoft expected the Surface to dramatically outsell the iPad on a per-store basis this holiday season.

Of course, there might be other factors we don’t know about that would help explain matters. Maybe Microsoft will announce next week that Surface will be for sale in every Target, Walmart, Best Buy and RadioShack in the nation. Or that it’s dramatically ramping up its international availability, effective immediately. Or maybe my math is so far off that moving a few million Surfaces this year wasn’t an impossible dream.

But here’s another explanation which I think is at least as likely. Maybe DigiTimes’ figures are as fictional as some of the other stuff it reports — and Microsoft never planned to ship four million Surfaces in 2012.

6 comments
WillyThePooh
WillyThePooh

A lot of comments didn't mention that Apple did lower their price on Black Friday while MS keep their price solid. But even when Apple didn't lower their price, iPad will still outsell surface RT as for the same price, people will choose the one they know well instead of trying for the unknown.

BongBong
BongBong

If they told you 200 sold per day, they were lying.

bathswana
bathswana

I asked how many were selling per day at the "local" (about 40 miles away) Microsoft pop-up store. Answer was about 200. The "store" is no more than a kiosk in the middle of the mall, with only 5 employees. I was amazed that they could sell that many.

I think the split between on-line and retail sales is skewed way more than 50% towards on-line. The vast majority of international sales are likely on-line sales.

jgpmolloy
jgpmolloy

bathswana The question you didn't ask was, "How many were being returned?"

worleyeoe
worleyeoe

Nice analysis. But all one has to do is ask? Who (i.e., Joe Consumer with no overt MS love) would pay $100-130 for a cover, keyboard, trackpad? I mean these things are extremely well engineered, but Joe consumer doesn't go out and do extensive research to understand why these are top-tier additions to their Surface tablets. I am a Windows fan, but MS clearly shot themselves in the foot on pricing. For $499 it had better include the touch cover keyboard or it is notably overpriced. And the just announced $899, tablet only, is a BIG ouch! Now, they've shot themselves in the head. Hell, get rid of Office being included and then let consumers download the individual apps they use off the Windows Store for say $20 a pop. I use Word constantly and would damn skippy pay $20 to get the latest version.