Yes, Microsoft could turn the next Surface RT into a winner. Here’s how.

It’s no longer surprising that Microsoft’s Surface RT(s msft) isn’t the sales hit the company had hoped for. Last month, Microsoft dropped the product’s price by $100 and took a $900 million inventory write-down. Last week, research firm IDC shared its tablet shipment data for the quarter but Microsoft was nowhere to be seen in the top 5.

Should the company throw in the towel on Surface RT or can a refreshed model turn sales around?

I started thinking about this very question after installing the Windows 8.1 beta on a Surface RT a few weeks ago. And I’m reminded of it again when reading that IDC estimates only 200,000 Windows RT devices shipped last month.
Surface RT units only make up a portion of that number as there are still a few vendors shipping Windows RT computers: Dell(s dell), Acer and Asus come to mind although Asus said earlier this month it will no longer do so, joining Samsung, HP and others that have left or will be leaving Windows RT behind. Asus VivoTab Smart Tablet Microsoft announced on Wednesday that Windows 8.1 begins rolling out worldwide on October 18. That’s good news for existing Surface RT owners, because based on my experience so far, the software update improves the Surface RT user experience. There are some tweaks, fixes and performance improvements, and it includes Outlook for Windows RT, which has worked very well in my limited testing.

An update to Windows 8.1 alone won’t turn Surface RT sales around

Microsoft hasn’t officially announced a follow-up to its Surface RT hardware, but if it does, it could help boost sales. I actually like the form factor and build quality of the current Surface RT: It’s lightweight, offers great battery life and has a good keyboard option. Overall, it can feel sluggish, however, and let’s face it: There are faster chips available to Microsoft now then when it first launched the Surface RT last year.
The device doesn’t need an overhaul on the outside, in my opinion, but on the inside. If Microsoft can find a way to put a Qualcomm(s qcom) Snapdragon 800 chip inside the device and drop the price of its base 32 GB model to $299, the product would be far more compelling to consumers. Upgrading the display to full HD from 1366 x 768 would be a nice stretch goal, but if it means raising the price above that $299 mark, I’d skip it.

What else could Microsoft do? Kill. The. Desktop.

I get that the Desktop is a staple of Windows, but I think it does more harm than good. From a user experience standpoint, it’s completely jarring to me in the touch-friendly and fresh new Metro mode to jump back to 1995 with a desktop environment that’s really just a placeholder for Microsoft Office and Internet Explorer. Microsoft should find a way to build a Metro-style version of Office for what I’ll call Surface RT 2.0.

Iconia W3 in Desktop mode

Getting rid of the desktop could also help with perception. Without a Desktop ever appearing, some people might stop asking the question: “What old Windows apps can I install on Surface RT?” Microsoft might not consider breaking free of the Windows legacy a good thing from a branding perspective, but if it wants to create a “new” version of Windows, it would help to cut ties to the old ones.

Where’s the value?

Perhaps the biggest reason the Surface RT has failed is a simple one: Microsoft hasn’t convinced enough people the product is a good value. A key reason for that is the similarly priced full Windows 8 tablets powered by Intel(s intc) Atom chips. I noted this in January after testing one of these devices: Why buy “half” of Windows 8 when you can get the whole thing?
With these competing devices offering all of the same functionality as the Surface RT plus Windows legacy support and comparable battery life, why buy the Surface RT? The inclusion of Office in Microsoft’s product is nice and often touted as a value-add but there’s something wrong in that line of thought.
If people just have to have tablets with Microsoft Office, why is it that many other tablets that cost more are far outselling the Surface RT? It’s because more people don’t need Office on a tablet than those that do; meaning: It’s only a value-add for a small part of the potential tablet audience.

Windows RT Office

Also not helping the value proposition is that some well known apps available on other platforms aren’t yet available on Surface RT. That’s changing a little for the better as Foursquare, Rhapsody, Flipboard and Facebook(s fb) will support the platform.
Windows RT still isn’t the first platform choice for tablet developers but the app selection is getting better. I think the Surface RT has bigger problems to address than apps, however.
Again, after using Windows 8.1 on Surface RT, I think Microsoft has a compelling product for a specific audience — but only if it’s priced right and the performance level is raised to compete with other devices on the market.