Microsoft wants its Surface Pro 3 to compete with Apple's
MacBook line. It that the right move? Source: Microsoft.
If you've been paying keen attention to commercials for
's new Surface Pro tablet, you'd have noticed that it doesn't
appear that Microsoft is positioning the product as a tablet but
rather as a "laptop replacement."
The motivation for this marketing approach was less clear
considering that, in the past five years, tablet sales have
increased substantially and PC sales have slowed. It appears
consumers have already gotten this memo: Matter of fact, a
shocking IDC report pegs PC sales as declining by a massive 9.8%
on a year-over-year basis last year and expected to drop another
6% this year. But it's all coming into focus now, Microsoft's
's MacBook line with its Surface Pro 3.
Has Apple cornered the only segment of the PC market that
A recently released
report from Ed Bott
gives insight into Apple's successful MacBook strategy. While
analysts and fans obsess about Apple's iPhone and iPad strategy
-- and they should, as those two lines combine for nearly
three-quarters of Apple's revenue -- Apple's Mac strategy is
impressive in its own right.
Many companies do well when presented with favorable
tailwinds. However, it takes a superior corporate strategy and
product to grow when the industry is contracting. And that's just
what Apple did by growing its Mac line by 2.7% in the face of a
sluggish computer environment.
And just how did Apple do it? Well, according to Ed Bott, it
all has to do with product positioning. Apple's been very good at
honing in on a part of the PC market that is still doing well --
premium ultramobile computers. Those are PCs that weigh in at
less than 1.6 kilograms (3.5 lbs.), are optimized for media
consumption, and retain capabilities for full-scale data
And it's still a growth area. Gartner predicts that the
premium ultramobile market will grow from 22 million shipments in
2013 to 55 million in 2015. In addition, Gartner predicts that
this subsection will grow from under 7% of units shipped
currently to 17.3% in 2015.
Can Microsoft win, and does it need to?
Microsoft is positioning its Surface and Surface Pro products to
snag some of the 58% annual market share growth this segment is
projected to experience over the next two years. The Surface has
had a rocky rollout since its introduction. The recently
discontinued Surface RT was a disaster, and after a nearly $1
billion writedown it was credited in part with the loss of former
CEO Steve Ballmer's job.
But returning to the "favorable tailwinds" argument, even if
Microsoft isn't the strongest competitor in this field, it is
entirely possible these favorable conditions will help sell the
product as long as it's considered a worthy competitor. And let's
not forget Microsoft's ace in the hole here: a native-run
Microsoft Office suite for both students and the enterprise
For what its worth, with the Surface Pro 3 Microsoft brings a
nice premium device to market that competes with Apple's
entry-level MacBook Air admirably. Both units have similar
storage and RAM specs -- the Surface Pro emphasizes its
touchscreen, detachable keyboard, and stylus features. However,
for the money it appears Apple's still bringing a more cost
effective unit to market. Its entry-level model 13-inch MacBook
runs at the same cost with the same RAM --128Gb--and to get the
functionality of Apple's MacBook you need the additional keyboard
attachment that runs $130.
One small problem with this strategy: something called an
Regardless of how much Microsoft wants to compete against Apple's
MacBooks, its Surface Pro 3 is a tablet and will be judged
against other tablets. And that's the problem. Right now, Apple's
iPad is years ahead of Microsoft's tablets when it comes to its
ecosystem. For perspective, Microsoft recently broke down and
allowed Microsoft Office on the iPad. For years that was one of
its largest selling points for its Surface line of tablets. Not
only that, but Apple's 128Gb iPad model starts at $799.
Also, Microsoft has to continuously worry about original
equipment manufacturers. In the event that Microsoft's Surface
line of tablets starts to pull revenue away from other
manufacturers, they could respond by abandoning new
Microsoft-based products. Recently,
CEO Meg Whitman caused a stir when she labeled Microsoft a
"competitor" instead of a partner. HP's been diversifying away
from Microsoft and cozying up to
's Chromebooks of late.
Microsoft's Surface line of tablets has had a rough go of it.
It's estimated that Microsoft lost nearly $370 million last
quarter from Surface-related operations. And while many analysts
are opining about when Microsoft will ax the line, the company
appears to want to compete. In fact, the company's rolling out
the device to 25 more countries by month's end. Many of those
countries are in Europe, a place where Windows Phones have
substantive market share.
I question the strategy to position the product as a laptop
replacement and ignore existing tablet competition. However,
given the favorable tailwinds for premium ultramobile units and a
rollout to Windows-friendly Europe, I'm interested to see how the
Microsoft's Surface line performs going forward.
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Why is Microsoft's Surface Pro Challenging
originally appeared on Fool.com.
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