Microsoft Corp.’s Surface tablet computer, unveiled this week to compete with Apple Inc.’s iPad, will initially go on sale without a connection to mobile-phone networks, according to two people familiar with the matter.
Microsoft (Nasdaq: MSFT) is equipping the device with a Wi-Fi short-range connection, said the people, who declined to be named because the full specifications of the new product have yet to be made public.
Microsoft also may be developing its own Windows Phone handsets, departing from its current practice of working only with partners like Nokia Oyj, according to Rick Sherlund, an analyst at Nomura Holdings Inc.
The company may be collaborating with a contract manufacturer to build a phone, Sherlund wrote in a note today, citing industry sources. Sherlund, who recommends buying the shares, said he wasn’t sure if the device would be a reference design for other companies to use as an example for Windows Phone products, or a Microsoft-branded phone for consumers.
Apple, the market leader in tablets, began selling a new iPad in March with the fastest cellular connection, known as long-term evolution, or LTE. Since it first went on sale in 2010, the iPad has had the option of a mobile-phone chip, which lets users access the Internet almost anywhere there is network coverage. Apple also sells a Wi-Fi-only iPad model.
Wi-Fi-only models are the larger part of the market right now and Microsoft’s decision may enable it to keep costs down, said Ben Bajarin, an analyst at technology consulting firm Creative Strategies. Still, it could curtail the company’s efforts to promote Surface as a device you can use anywhere and in any way, Bajarin said.
“The way that Microsoft is positioning this product –that it’s highly mobile but also has the functionality of a notebook — that customer might be more interested in working from any location and not being bound by Wi-Fi,” said Bajarin.
Most tablet customers are still using the devices mainly in the home, where they have Wi-Fi, and are avoiding mobile-phone connections on concerns about the cost of monthly data plans, said Carolina Milanesi, an analyst at researcher Gartner Inc. in a telephone interview.
“Wi-Fi-only is not a limitation for Surface,” Milanesi said.
Microsoft said earlier this week that it will begin selling the Surface later this year, altering the company’s long- standing practice of focusing on computer software and leaving the hardware to its partners.
Redmond, Washington-based Microsoft has contracted with Pegatron Corp., a Taiwanese company that assembles Apple’s iPhones, to manufacture the Surface, two people familiar with the matter said.
Catherine Brooker, a spokeswoman for Microsoft, declined to comment.
Planning Own Phone?
Microsoft said earlier that smartphones with the new Windows Phone 8 program will go on sale in the fall from Nokia, Huawei Technologies Co., HTC Corp. and Samsung Electronics Co. The company didn’t mention plans for its own phone.
Microsoft needs to boost its share of the phone- software market, which was 2.2 percent in the first quarter, according to IDC, lagging behind Apple Inc. and Google Inc.
“We would not be surprised if MSFT were to decide to bring their own handset to market next year given that MSFT has decided to bring to market their own Windows 8 tablet/PC products,” Sherlund wrote, using Microsoft’s stock ticker.
“We are big believers in our hardware partners and together we’re focused on bringing Windows Phone 8 to the market with them this year,” said Stacy Drake, a director in the Windows Phone group, in an e-mailed statement.