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Microsoft’s Surface Tablet Said to Be Wi-Fi Only At First

June 19 (Bloomberg) -- Bloomberg's Erik Schatzker reports that Microsoft Chief Executive Officer Steve Ballmer is hoping the company's new tablet, Surface, will be a hit and challenge the market dominance of Apple's iPad. Schatzker speaks on Bloomberg Television's "Market Makers." (Source: Bloomberg)

Microsoft Corp. (MSFT)’s Surface tablet computer, unveiled this week to compete with Apple Inc. (AAPL)’s iPad, will initially go on sale without a connection to mobile-phone networks, according to two people familiar with the matter.

Microsoft 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.

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.

Home Use

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. (4938), 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.

The shares fell 0.1 percent to $30.11 at 9:43 a.m. in New York. The stock had increased 16 percent this year through yesterday.

To contact the reporters on this story: Ian King in San Francisco at ianking@bloomberg.net; Dina Bass in Seattle at dbass2@bloomberg.net

Photographer: Jonathan Alcorn/Bloomberg

Steven Sinofsky, president of Windows and Windows Live Engineering Group at Microsoft Corp., speaks at a news conference launching the company's Surface tablet computer at Milk Studios in Los Angeles, California, U.S., on Monday, June 18, 2012. Close

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Photographer: Jonathan Alcorn/Bloomberg

Steven Sinofsky, president of Windows and Windows Live Engineering Group at Microsoft Corp., speaks at a news conference launching the company's Surface tablet computer at Milk Studios in Los Angeles, California, U.S., on Monday, June 18, 2012.

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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