Report: Microsoft Working on Second-Generation Surface

The Nvidia CEO let slip the information that it's working with Microsoft on an update to the Surface RT.

Despite poor sales and a crush of negative press for its forays into the tablet computing space, Microsoft continues to forge ahead.

The latest evidence of that is a report suggesting it's developing a second-generation Surface tablet product line.

Chip maker Nvidia is collaborating with Microsoft on this next-generation Surface tablet, Nvidia CEO Jen-Hsun Huang confirmed to CNET, in an interview on Thursday. Microsoft declined to comment. The effort is centered on Surface RT machines, using Microsoft's Windows RT operating system for ARM-based processors.

The companies have collaborated before on the Surface RT, with Nvidia supplying its quad-core Tegra 3 ARM-based processor for a product launched in late October. Since then, the tablet has floundered in the market. Explanations have tended to focus on a lack of apps for the device (Surface RT machines can only run Windows Store apps, not Desktop apps), as well as less computing power with ARM chips vs. x86 chips.

High prices and ineffective marketing by Microsoft have also been cited as reasons. Acer chairman J.T. Wang recently said that "the Windows camp has to do something to reestablish or reinforce confidence among PC users," according to a report yesterday by The Wall Street Journal. On the x86 side, that effort could come from lower priced Intel Bay Trail chips, with Intel forecasting low-cost laptops to come this year.

ARM-based Windows RT machines in general represent just a small slice of the PC market. For instance, data from IDC on the second-quarter global PC-tablet market indicate that Windows RT shipped on just 200,000 devices. Most of those devices were Microsoft's own Surface RT tablet. The OS finished the quarter with a 0.5 percent market share.

The Surface product line is yet to see profitability. Sales of the Surface RT and Surface Pro products delivered $853 million in revenue in fiscal-year 2013, according to Microsoft's most recent 10-K filing. However, that amount was not enough to offset the $900 million write-down that Microsoft took in its fiscal fourth quarter to cover "Surface RT inventory adjustments."

To boost sales, Microsoft slashed the price of its Surface RT devices by $150 in mid-July, followed by a $100 price cut to its Surface Pro line this month.

The Surface RT, like all other devices running Windows RT, initially did not come with the Microsoft Outlook e-mail program, although the Surface RT does come bundled with Office Home and Student 2013 RT. The omission of Outlook was a factor that contributed to the product's poor reception, Huang told CNET.

"It is the killer app for Windows," CNET reported Huang as saying. "Now we're going to bring it with the second-generation Surface."

Microsoft has already announced that Outlook will be included in the forthcoming Windows 8.1 RT OS release, which is expected sometime this year, perhaps this fall. Windows 8.1 RT will be a no-cost update for all Surface RT devices.

About the Author

Gladys Rama (@GladysRama3) is the editorial director of Converge360.

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