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Surface and Windows 8: you've probably heard of them, and you probably know that these are the cards Microsoft (NASDAQ:MSFT) as just played in the battle for the predominance of the PC and the tablet market. What's at stake? The future of the entire company. How's it going? Not so well.

Windows 8

After the initial buzz, sales of the new operating system are actually heavily trailing previous internal estimates: Tami Reller, finance and marketing head of the Windows division, speaking recently at a Credit Suisse conference, was broadly misquoted as saying that Windows 8 sales were trumping those of Windows 7 in the same month-launch period. What she actually said, was that Windows 8 sales were "roughly in line [with those of] Windows 7".

Moreover, not only is Windows 8 merely matching Windows 7 numbers, but the official sales figure of 40 million for the first month just doubles the monthly sales figure of 20 million Windows 7 held for 3 years straight. Problem is, Windows 8 is actually the least expensive OS update Microsoft has rolled out in recent history: current Windows owners can upgrade for just $40, that compares to three times as much Windows users had to pay to upgrade to the cheapest version of Windows 7 (not to mention the mere $15 upgrade Microsoft is offering to Windows 7 PCs buyers).

Surface RT

Microsoft heavily advertised its new tablet during the last few moths and actually generated a fair amount of consumer buzz. It then decided to sell it only through its online store and its still limited brick-and-mortar retail presence. That decision apparently is not paying off as expected: initially Microsoft forecasted to sell 4 million Surface RT devices by the end of the year. Now Digitimes reports that the company halved components orders to just 2 million units. How does this compare to what the iPad did after its not-so-far launch in 2010? Well, turns out that Apple (NASDAQ:AAPL), when the tablet market was not even a blink compared to the PC-industry, sold 3.27m 1st generation iPads in just a little bit more than 2 months, without the holiday season to support those sales.

That is actually a better result than what Microsoft is achieving, despite the ferocious advertising campaign, the upcoming holiday season and the fact that the tablet market is expected to reach 119 million units for 2012.

Surface Pro

Apparently, Microsoft has yet an ace in the hole to play: the Surface Pro, which runs the full version of Windows 8, instead of the scaled down Windows RT made for the Surface RT. Though, it does so for a hefty sum: prices have been confirmed last week: the Pro will start at $899 for the 64gb version, without counting the touch cover, that goes for more than $100, sending the total past $1,000.

That's actually $70 and $170+ respectively more than what Apple charges for the correspondent iPad version.

The reason for this stellar-pricing will surely be that Microsoft is selling the best tablet of all. Well, without initiating a discussion about which operating system is the best to consumers (Android, iOS or Windows 8) - I'll let January sales figure tell that story - let's just say this: Microsoft has just disclosed that the Surface Pro will have a battery life somewhere between 4 and 5 hours. That's actually less than the average laptop, and nowhere near the iPad performance.

Conclusions

Compared to Microsoft's budget, Windows 8 is underperforming. The Surface RT is heavily underperforming. The upcoming Surface Pro is going to underperform, and for a few simple reasons: it's going head to head with the iPad, the absolute king of the hill in the tablet market, offering way less (e.g. battery life) and costing much more (at least $70).

These products represented the last chances Microsoft had to maintain its position in the declining PC market while building a new position in the tablet market: the company misfired badly.

I say, head for the lifeboats, and abandon this sinking ship before it's too late.

Source: Microsoft: Abandon Ship Before It Sinks

Additional disclosure: Long AAPL via February 2013 calls