Home > Uncategorized > MSFT launches Surface Hub in two weeks.

MSFT launches Surface Hub in two weeks.

Dallas SalazarSA
June 21, 2015

I think Surface Hub is not only going to be a meaningful revenue segment for the company but a huge value-add driver and retention vehicle.
MSFT should consider being highly promotional with productivity suite platforms like Project, Power BI, etc. at Surface Hub launch to help both with take rate.
One fully immersed into the MSFT apps, especially if deployed on the Surface Hub, I believe customers will have a hard time exiting the ecosystem.
The Surface Hub launch will be interesting to watch.
Microsoft (NASDAQ:MSFT) is two weeks away from launching sales of its Surface Hub which I think has the potential to be a huge value-add to its productivity suite take rate – particularly Project, Power BI, Power BI Design, and Visual Studio.

Everything Microsoft has done as of late from restructuring management to continuing to drive key productivity integrations for its platforms has been in this effort to make its platforms the platforms of foundational choice. Microsoft would like nothing more than to see Power BI, for instance, become the Word for Business Intelligence – a default program that users turn to without second thought.

That’s also why it created the Surface Hub in my opinion.

The Surface Hub is all about making more visible the value of the Microsoft ecosystem, again the primary strategic initiative at the company currently. Surface Hub will be an immediate collaboration and workflow value-add and should become the central conference hardware for any institution that can afford one. It’s in this and how Surface Hub will be an ancillary capture funnel for the other applications that I think Microsoft should seriously consider being highly promotional with app licensing to Surface Hub customers for a period of time immediately after purchase.

With a price tag of either ~$7,000 or ~$20,000 Microsoft only needs to sell 50,000 of its larger Surface Hub to create ~$1 billion in revenues. With most of the non-Office suite apps (Project, Power BI, etc.) having incremental subscription fees I think as a way to drive the value of both Surface Hub and the apps themselves Microsoft should give away 12 months access to the productivity apps across the board for 12 months with the purchase of a Surface Hub. Of course not on an enterprise level but to a set number of subscriptions.

I think that with an ideal delivery platform for collaboration, which Microsoft will also be making quite a bit of topline from, that the benefits of immersing the customer in the total ecosystem hugely outweigh any near-term reductions to subscription revenue. I think Microsoft should make a hard push to both establish its Surface Hub as a mission critical, accretive piece of hardware while exampling the efficacy of its total productivity suite. Again, both can be done more effectively when used in tandem in this instance.

I would also think it beneficial to Microsoft if on July 1st the company announces next iteration optimizations of all the platforms that are under its umbrella. Microsoft needs to launch Surface Hub with a bang and have everything as dialed-in as possible. If Surface Hub can gain traction not only will it become a new, most likely low to mid-margin revenue segment but it will become a retention vehicle from high-margin subscription revenue.

I’m actually expecting a big, positive reception for Surface Hub and think that it provides meaningful upside to numbers in the mid-term.

I continue to recommend a long position in Microsoft.

Good luck everybody.

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