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Microsoft's Surface Duo set to face smartphone industry's historic challenges

Microsoft Corp.'s latest effort to get back into the smartphone game is poised to face arduous obstacles despite the company's calculated steps to stand out in the competitive industry.

Among the bevy of new Surface devices that the tech giant unveiled at an Oct. 2 event in New York, the biggest surprise was the Surface Duo, a dual-screen smartphone scheduled to launch in late 2020. It runs on Google LLC's Android operating system.

Although the Surface Duo's introduction video starts with a woman pulling the device out of her bag to receive a phone call, Microsoft's CEO Satya Nadella and Chief Product Officer Panos Panay are adamant about avoiding the smartphone label. Instead, the executives say that both the Duo and Neo are part of a brand-new device category under the Surface umbrella. Analysts at research firm Strategy Analytics feel that Microsoft may be distancing itself from the smartphone label due to the company's turbulent history in this device category as well as the lack of success similarly designed products have had in the past.

SNL Image
Microsoft Chief Product Officer Panos Panay showing off the Surface Neo and Duo.
Source: Jordan Alvarez for S&P Global Market Intelligence

"Microsoft has done nothing but fail in smartphones for the past two decades and this latest device does little to change that," said Neil Mawston, executive director of global wireless practice at Strategy Analytics. "Two-screen smartphones have never taken off in the past due to the high pricing associated with this questionable design. Consumers prefer one large continuous screen to two smaller separate screens."

The Duo sports two side-by-side 5.6-inch displays connected by a 360-degree hinge that allows the device to combine and make an 8.3-inch display. The design is very similar to the other dual-screen device also set to launch late next year, the Surface Neo, which is more of a two-in-one tablet device running on Microsoft's new Windows 10X operating system.

Citing Kyocera Corp., NEC Corp. and ZTE Corp. among the smartphone makers that launched several dual-screen smartphones in the last decade that were unable to make a dent in the market, both Mawston and Ken Hyers, director of emerging device technologies at Strategy Analytics, said the Duo's chance of success in the smartphone market is slim.

"While it's always good to see vendors exploring new designs that shake up the market, the Duo unfortunately is not one of them," Hyers said. "By the time the Duo goes on sale, there will be multiple foldable display smartphones and tablets available from multiple vendors such as Samsung, Xiaomi and Motorola."

According to Milan Ringol, an analyst with Kagan, a media market research group within S&P Global Market Intelligence, Microsoft may have one key advantage over the competition: software. And it is something that similar devices have historically struggled with.

"Microsoft is putting more effort on the software side to make both screens work synergistically," Ringol said. "That seems to be the main point of what the company is trying to do. It's not aiming to compete against other smartphone vendors on hardware and shipment levels and is instead marketing the device as its own thing that provides a user experience different from a traditional smartphone that is intended to either supplement it as a second device or supersede it entirely."

Jitesh Ubrani, research manager of worldwide mobile device trackers at IDC, agreed that Duo does not necessarily signal Microsoft's return to the smartphone business, but instead is part of the company's strategy, along with another dual-screen, foldable tablet Surface Neo, to ensure that it has a place in the future of mobile computing.

"Microsoft gave up on their mobile platform when they shuttered Windows Phone," Ubrani said. "It's not that mobile is not important, rather they have smartly realized that they don't need to have a mobile operating system to make money in the mobile devices market."

Ubrani also dismissed concerns about the dual-screen nature of the Duo, arguing that Microsoft's original Surface device also garnered complaints about being too gimmicky before it standardized the two-in-one tablet/laptop hybrid product category.

"These devices are moving in lockstep with consumer expectations and demands," Urbani said. "Consumers want bigger screens and these devices offer that without any of the drawbacks associated with larger screens, such as giving up portability or pocketability."