For Panos Panay, head of all hardware devices at Microsoft and one of the primary forces behind the Surface lineup of computers, every new Surface product begins with a story. “At the beginning of every product, we talk about how would we tell the story onstage,” he says. “What is the one thing on this product that people will look at and say, ‘I get it. That’s what I need.’”
It’s these presentations, combined with a streak of innovation, that have shaken up the PC and tablet market, that have made Panay somewhat of a celebrity in tech-industry circles. His presentation style centers on one key word: passion. It’s a word that Panay uses over a dozen times during a 40-minutes phone call. Watching Panay unveiling a product in person, it’s hard not to get caught up in his sense of urgency. Even five years ago, before the Surface was a hit, Panay’s presentation style was drawing acclaim:
It’s a style that’s also easy to mock: A Gizmodo headline from 2016 reads, “Microsoft Exec Almost Climaxes Onstage: ‘It’s Just Exploding, It’s Awesome to See.’” One blogger, referring to Panay’s unveiling of the Surface Pro 3 in 2014, called his presentation style “verbal diarrhea.”
It’s a fair criticism; Panay’s earlier presentations had a certain breathlessness to them, like he was hawking a vegetable peeler at the state fair — complete with stunts like intentionally dropping a Surface tablet live onstage. His stage presence now is slower, more measured. He’s learned the power of pauses, of letting a word or phrase sink in. He is, perhaps, more confident in the story he is telling.
The presentations themselves take six weeks to prepare for, as Panay and his team work to distill everything they have worked on into a 25-minute spiel. Of course, none of this would merit much attention if Panay was telling the story of a poor product. But Panay and his team have, to the surprise of nearly all industry watchers, been on a long streak of good-to-great hardware releases under the Surface line, leading up to this month’s release of the Surface Book 2.
The Surface lineup got off to an ignominious start. The first product to carry the Surface name released to the public, the Surface RT, was released in late 2012. It was panned by reviewers and ignored by consumers. It ended up being a $900 million write-off for Microsoft, with the company sitting on millions of unsold tablets. The news of the write-down broke in July 2013, sending Microsoft’s stock price tumbling and providing plenty of grist for tech press postmortems with headlines like, “Microsoft Writes Off Nearly $1B to Account for Surface RT Bomb.”
“Is it easy reading that headline or seeing the story? Absolutely not,” says Panay. “But it is an opportunity to learn and understand how to grow and get better. And I think we did that.” And, perhaps, Panay appreciates how an early stumble makes for a better story. A year after the stories of warehouses of unsold Surface tablets made waves, Panay would unveil the Surface Pro 3 in 2014, the first bona fide hit in the Surface lineup.
“The real turning point was the Surface Pro 3,” says Panos. “That was the moment — that was the first product that really came to the market as a product that sat right between this need that people have between their laptop and their tablet. That was when the product started to stand for something that was important to how people interact with their machines.”
By the time the Surface Pro 3 was released in 2014, the tablet market was already showing signs of weakening after years of rocketing growth. Unlike smartphones, which people were happy to replace in regular intervals, there was little churn in the tablet market. And the use case for the tablet was still largely as a “lean-back” device — something you used to consume information, not something you used to produce it. With smartphone screens ballooning in size, the tablet seemed to be facing a slow decline.
While the Surface Pro 3 could absolutely be used as a lean-back device, it’s at heart a tablet that was aggressively meant for productivity. While it was still a tablet, it had an attachable keyboard cover with trackpad. Microsoft’s tagline for the product was: “The tablet that can replace your laptop.” It’s a tall claim, but it’s one that holds up to scrutiny, depending on what you do on your laptop. If you mainly write or create PowerPoint presentations or muck around in Excel spreadsheets, it absolutely can replace your laptop. If you do video editing, no so much.
For the higher-end market, Microsoft has the Surface Book, first released in 2015 and out now with the Surface Book 2. The Surface Book has an even slicker trick than being a tablet that can replace a laptop. It looks (mostly) like a standard laptop, but splits processing and battery power between a detachable screen and the bottom keyboard unit. Keep the screen and keyboard together and you had a high-powered laptop. Remove the screen and you have a beautiful tablet.
Since 2015, Microsoft has continued to aggressively fill out its Surface line. There’s the Surface Studio, a 28-inch desktop computer that can be tilted at an angle and drawn on like a drafting table, meant for high-end graphic-design work. The Surface Laptop is a straight-down-the-middle clamshell laptop. And coming out on December 1 is a Surface Pro with LTE support — meaning no need for Wi-Fi to get online, just access to a cell data signal. Five years ago, some were predicting the PC and laptop market would be gone, replaced entirely by tablets. Instead, something weirder has happened: The tablet and laptop are becoming more and more mutable, with wilder form factors and more varied use cases. And it’s been Panay and the Surface team that have led the charge. No matter what kind of work you do — or, as Panay might put it, no matter what kind of story you may want to tell — the Surface lineup has a machine made for you.
That’s the story Panay believes deeply about the entire Surface lineup — he and his team want to change how people interact with the machines they use to get their work done.
It also helps that Microsoft is willing to pour money into getting the story of the Surface out there, far beyond swallowing a $900 million loss out of the gate. Sponsorships have made the Surface ubiquitous on the sidelines of NFL games, and the Surface logo is an increasingly common sight in movies and TV shows — it makes prominent appearances in Jordan Peele’s hit movie Get Out and the CW’s Crazy Ex-Girlfriend. (Of course, there’s some backlash: New England Patriots coach Bill Belichick has made it clear he hates using the Surface, and many CNN anchors were prominently using Windows Surface tablets on Election Night 2016 — as stands for their iPads.)
Still, there’s part of the story of Surface that confounds many: Why is Microsoft selling hardware? In October, some openly speculated about whether the Surface really made sense. Steve Brazier, CEO of analyst firm Canalys said he expected Microsoft to shut down its Surface division before the end of the decade. “The Surface [financial] performance is choppy; there are good quarters and bad quarters, overall they are not making money,” said Brazier. “It doesn’t make sense for them to be in this business.”
Gianfranco Lanci, corporate president and COO at Lenovo, was even harsher in his assessment of the Surface lineup: “Microsoft is making a lot of money on cloud, making a lot of money on Windows and Office, but losing a lot of money on devices. And frankly speaking, it is difficult to see why they should keep losing money.”
Panay fired back. “It’s so far from the truth,” he told Business Insider, calling the comments the “tabloid rumor of the week.” Microsoft’s latest earnings report, which came out at the end of October, showed strong growth for the Surface division — but it’s still true that vast majority of the revenue rolling into Microsoft is because of its cloud-computing and software business.
Jeff Orr, an analyst at ABI Research, says Microsoft’s goals with Surface aren’t about revenue — it’s about understanding how people use Windows, and trying to change that behavior. “It’s about getting close to the customer and really understanding the needs of businesses,” he says. “Surface is a hardware platform that helps Microsoft affect what combination of hardware, software, and services should look like for that Windows market.” In industries that have been loyal to Windows — financial services, health care, education — Surface allows for Microsoft to provide a template of how hardware and software can work together, but also allows for it to step back and let other manufacturers create the hardware to run Windows and its cloud solutions on. “Microsoft now has all of this knowledge and data that it can share with its partners,” says Orr.
The PC market has quickly and quietly shifted in response to the Surface. Every major Windows laptop manufacturer now offers something that somewhat mirrors the Surface Book or Surface Pro’s adaptability, a broad and fluid space in computing known as “hybrid” or “2-in-1” laptops (and which is now the fastest-growing sector of the PC market). Even Cupertino is taking notice. Apple’s iPad Pro — with its Apple Pencil stylus and keyboard cover and “What’s a computer?” ad campaign — is now clearly aiming to be the same sort of laptop replacement that the Surface Pro pitched itself as.
The Surface Book 2 I’m typing this on feels great. If it offers perhaps too much power and too many options for a user like me — someone who mainly needs a machine to type on, and not much else — there’s plenty of other places in the Surface lineup I could potentially land on.
Panay demurs when asked about how the Surface Book 2 stacks up against the MacBook Pro. “Respectfully, Apple makes great products, and MacBook is a great product, but it’s more important to look at your customer and what they need,” he says. Still, it’s not hard to see the narrative developing — while Apple’s laptop and desktop lineup has stagnated, and the iPad Pro struggles to really convince people it’s a productivity machine, the Surface presents a more intriguing story: Jump in with Microsoft, and there’ll be a machine there to catch you and help you do the work you need to do.
Jumping back to my work-issued MacBook Pro, I find myself occasionally wanting to tap on the screen to minimize something while reading, or simply take the screen off while settling into a long document. My hope is that Apple will eventually offer more and more computers that mirror the diversity that Panay’s Surface team has infused into the PC market — that the story that Panay and his team are telling at Microsoft is a compelling one, and it’s one that others are starting to believe in as well.