Microsoft Surface
A woman listens to a store employee talk about the Microsoft Surface during the grand opening of a flagship Microsoft Corp. retail store in New York, October 26, 2015. Reuters/Lucas Jackson

If Microsoft launches the Surface Phone 2017 sometime soon, it may capture a significant share in the market provided it targets the premium segment of the market. The Surface Phone 2017 will be a smartphone version of its Surface tablet and the device is slated to be released in the first quarter of 2017.

Microsoft CEO Satya Nadella had also earlier teased about the flagship, reports Forbes. As already mentioned, Microsoft will now be focusing solely on the premium segment and it will enter the business with a fresh outlook with the Microsoft Surface Phone 2017. Apart from Lumia 950 and Lumia 950 XL, most of Microsoft’s phones catered to the sub-$200 segment.

This segment, though constantly growing, generates very low margins (8-10 percent) and profitability. This was perhaps the primary reason for Microsoft’s failure in the smartphone market. Moreover, Google’s Android One initiative undercut Microsoft’s price by nearly 20 percent. Windows Phone market share came tumbling down from 1.8 percent in Q3 of 2015 to 0.4 percent of all smartphone shipments during the second quarter of 2016, reports IDC.

Now that Surface devices have created hype in the market, a Microsoft Surface Phone 2017 could be Microsoft’s knight in shining armour. Microsoft is planning to use the Surface brand name and the popularity of its Surface devices to capture an ultra-niche segment of the smartphone market.

It will be tough for Microsoft to clash against Apple as the iPhone has a gross profit margin of over 40 percent. However, there are two things that Microsoft can take advantage of when releasing the Surface Phone 2017. First, Surface devices can keep on increasing their revenue with a perfect mix of products from the Surface Book to the Surface Pro. Second, Apple has seen a recent dip in its market share mainly due to product fatigue.

The Microsoft Surface Phone 2017 should have a distinguishing feature that will make users choose it over other cheaper options.