Microsoft's Surface Devices Reveal Clues on Google's New Smartphone
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Version 0 of 1. When Microsoft Corp. (MSFT) unveiled its first Surface tablets in 2012, the move was met with a mixture of interest, curiosity and skepticism. It was clear from the start that Microsoft had put a lot of effort into creating differentiated, well-designed hardware, but there were big questions about the Surface line's software and user interfaces, how aggressively Microsoft would promote and sell the products and how much Microsoft's actions would upset PC OEM partners. There are some parallels here with Alphabet Inc./Google's (GOOGL) 2016 Pixel phone launches. For Google, there was a little less concern about how the company's hardware would upset OEM partners, mostly because the OEMs have little choice but to rely on Android. And Google was generally trusted to deliver a superior Android software experience. But there were (and still are) questions about how well Google's hardware would stand out in a very competitive high-end phone market, and about whether it would strike the distribution deals needed to battle Apple Inc. (AAPL) and Samsung head-on. All of that's worth remembering as Google's Pixel 2 and Pixel 2 XL phone go on sale this week via Google and a few carriers in a handful of countries. And also as the first reviews of the phones find much to praise about their software and camera quality, but register disappointment over their design and lack of a second rear camera. This is particularly true since the Pixel 2 comes as Microsoft, via the launch of new Surface Book laptops/detachables, makes one more incremental move to expand the reach of its now-successful Surface line. "The Pixel 2 and Pixel 2 XL do not razzle dazzle," wrote The Verge's Dieter Bohn while giving both phones a review score 8.5 out of 10. Not only do Google's phones come with large bezels at a time when Apple, Samsung and others are embracing edge-to-edge displays, Bohn observes that the coating Google placed on their aluminum cases to improve their grip also gives them a plastic feel. Also, he found the colors produced by the Pixel 2 XL's 6-inch OLED display to be too muted. But when it came to everyday use, Bohn found much to like. Performance and battery life were solid, Google Assistant was integrated well -- including via the phones' Active Edge feature, which lets a user squeeze a Pixel 2's sides to launch Assistant -- and the sound coming from their stereo speakers was loud and accurate. And their solitary rear cameras, which rely on a custom image-processing chip, were declared to potentially be the best cameras available on a smartphone. In so many words, other reviewers also reached similar conclusions about the Pixel delivering a quality user experience even if its design and specs won't wow many consumers. "Buy the Pixel 2 for the best camera on any Android phone and fast Google [software] updates, but skip it if you can't live without a headphone jack or a standout design," concluded CNET's Lynn La. TechCrunch's Brian Heater thinks the Pixel 2 phones don't "make a particularly compelling upgrade case for users of last year's model," given the lack of big hardware changes, but do make "an interesting case for the importance of moving beyond a purely spec-based approach to devices." The problem is that looks and/or specs still play very big roles in the buying decisions of many high-end smartphone users. And on those fronts, the Pixel 2 phones often come up lacking relative to phones such as the iPhone X and Samsung's Galaxy Note 8, which come with superb edge-to-edge OLED displays and front-and-back glass panels. Not to mention dual rear cameras that enable wide-angle shots, optical zoom and (judging by Pixel 2 reviews) superior background blur than what the Pixel 2's single camera can deliver with the help of machine learning. And the iPhone X, of course, also comes with an advanced 3D face-mapping/unlocking feature that Android rivals could be years away from fully replicating. Just as importantly, while Apple and Samsung's high-end phones are sold in every smartphone market on the planet, and often by every major carrier in a market, for now Pixel 2 availability has only been promised for the U.S., the U.K., Germany, Canada, Australia and India. Though that's a slight improvement relative to the original Pixel, which wasn't sold in India, a lot of big markets are still being left out. Likewise, Google continues to rely on a limited set of carrier partners; though the Pixel 2 can run on the network of any major U.S. carrier, Verizon Communications Inc. (VZ) remains the only one to sell Google's phones via its website and retail stores. But as far as design and specs go, Google is nothing if not good at gradually improving on products in response to user data and feedback. Heater reports hearing Google is "looking toward an edge-to-edge display for future [Pixel] models, and hasn't ruled out the possibility of joining the rest of the industry's embrace of multiple cameras." The company's recent $1.1 billion purchase of hardware assets and talent from Pixel 2 manufacturing partner HTC should help out with such efforts. And as far as distribution goes, Google, whose Nexus phones (developed with the help of OEM partners) typically weren't sold by any carriers, might be taking a go-it-slow approach to get a better feel for how to sell and market its phones in various regions. That may be both because of how tough the competition is, and because competing against Apple and Samsung the world over requires a huge advertising budget. All of this brings to mind how Microsoft gradually turned its Surface business from a punchline into a well-oiled operation doing $4 billion in annual sales. One of the first two Surface devices, the ARM-powered Surface RT tablet, was -- thanks to its reliance on the doomed Windows RT operating system -- a flop that resulted in a $900 million write-down. The other, the Intel-powered Surface Pro, did a little better, but was still relegated to niche status due to issues such as subpar battery life and the shortcomings of its Touch Cover and Type Cover keyboard accessories. It also didn't help that businesses weren't crazy about Windows 8 and its touch-optimized "Metro" interface. But Microsoft gradually updated Windows to let users avoid dealing with Metro if they didn't want to, and Windows 10, which launched in mid-2015, proved much more popular with businesses. The company also steadily improved the Surface Pro's hardware, launching models with top-notch battery life, better accessories and high-end Intel Corp. (INTC) CPUs. And with the help of a large base of channel partners, the Surface Pro managed to gain a sizable enterprise presence. That, in turn, gave Microsoft a foundation to get more serious about targeting consumers with the help of splashy ad campaigns. As well as to go after both consumers and businesses via its high-end Surface Laptop and Surface Book notebook lines -- both have generally gotten high marks for their hardware quality and battery lives -- and make a play for creative professionals via its costly Surface Studio all-in-one desktop. On Oct. 17, Microsoft unveiled its Surface Book 2 laptops; whereas the original Surface Book was only available with a 13.5-inch display, the Surface Book 2 features both 13.5-inch and 15-inch models. Like their predecessors, the devices sport touchscreens and detachable keyboards/trackpads. In terms of unit sales, the Surface line still only claims a modest portion of a PC market that continues to see 250 million-plus annual shipments. But with the help of good engineering, lots of advertising, better distribution and a willingness to learn from its mistakes, Microsoft has established itself as an important player in the high-end Windows notebook and tablet markets. In time, Google might be able to say something similar about its position in the high-end smartphone market. Facebook and Alphabet are holdings in Jim Cramer's Action Alerts PLUS Charitable Trust Portfolio. Want to be alerted before Cramer buys or sells FB or GOOGL? Learn more now. More of What's Trending on TheStreet: |