June 19, 2012, 2:48 PM

Microsoft looks to take bite out of Apple’s tablet market share with Surface

The tablet could displace notebooks and netbooks in the office, experts say.

Katie Evans

Managing Editor, International Research

Lead Photo

It’s called Surface, but Microsoft Corp. hopes its new tablet will resonate deeply with consumers looking for an alternative to Apple Inc.’s wildly successful iPad.

Microsoft yesterday unveiled its move to nab a piece of the growing tablet market with the launch of Surface, a tablet it hopes will appeal to consumers who like the notion of a tablet that comes with the Microsoft Office suite of software they are used to finding on their PCs.

The Surface comes in two versions: one with Windows 8 Pro and another with Windows RT, a pared down version of Windows 8 for mobile processors.

 

 

Both are based on Windows 8, Microsoft’s newest operating system, and offer Microsoft’s touchscreen-friendly Metro user interface that features tiles consumers can swipe to the right or left to move through the main menu. It also features what it calls a kickstand, which lets consumers prop up the tablet to make viewing videos easier.

The Surface is larger and heavier than the iPad, with a 10.6-inch display, compared to 9.5 inches for the iPad. The RT version weighs 1.5 pounds and the Windows 8 Pro model nearly 2 pounds, compared to the iPad’s 1.44 pounds. The Surface features a cover that can swing over to create a flat keyboard with track pad that the user can type on, magnesium casing and a pen accessory. The Surface keyboard senses keystrokes as gestures, enabling consumers to touch type significantly faster than with an on-screen keyboard, Microsoft says. The dual-purpose cover is one element that could set the Surface apart from the iPad as Apple’s tablet cover does not offer this feature.

The Surface is a departure for Microsoft in that it is manufacturing the hardware itself. With most of its Windows products Microsoft partners with hardware manufacturers such as Dell, Acer and Lenovo. This, analysts say, could cause friction with the business partners Microsoft relies on to build Windows-based PCs and smartphones and who also may also be looking to launch Windows 8 tablets.

“Our take on this is mixed,” says Shaw Wu, an analyst with investment banking firm Sterne Agee Group Inc. “On the positive, Microsoft is being more proactive in addressing the mobile device market where it has had little traction. The obvious issue with this is that it is competing with its customers and so we'll have to see how this plays out.”

Wu notes this isn’t the first time Microsoft has made its own devices. It did so with MP3 player Zune, smartphone Kin and gaming console Xbox.

While Zune and Kin never gained significant market share, Xbox has been successful, leading in market share among game consoles. However, Wu says that on a financial basis, Xbox has not done so well given the billions in investments and losses it has incurred over the past decade.

“It is debatable whether Xbox has been a success or not, especially given the current and future state (of gaming) where mobile gaming is clearly eating into the traditional console business,” Wu says.

Manufacturing its own tablet may be an attempt by Microsoft to showcase the features of Windows 8, just as Google Inc. did when it launched its own Nexus smartphone to showcase the benefits of  the Android operating system, says David McQueen, principal analyst at Informa Telecoms & Media.

By taking this approach, Microsoft needs to make sure it hits the market running, McQueen says.  “It is essential the tablet is properly marketed and shows its full potential if it has any hope of displacing Apple’s iPad in certain segments.”

While tablets are often viewed as devices that are better designed for consuming media and entertainment than for producing work, and more likely to be used at home or while traveling than in the workplace, McQueen says a tablet that features Windows Office and comes with a keyboard and track pad could be attractive to employers and possibly displace notebooks and netbooks in the office.

Microsoft has not said what the Surface will sell for, however, if it wants to appeal to employers and consumers and compete with the iPad, it will need to come with a competitive price tag, McQueen says, perhaps at or below Amazon’s Kindle Fire, which starts at $199.

“The risk with this is no profitability or more likely losses, as we have seen with Research In Motion’s BlackBerry PlayBook and Hewlett-Packard’s TouchPad,” McQueen says.

Apple has sold tens of millions of iPad tablets and is by far the market leader; Amazon has sold perhaps six to 10 million Kindle Fire tablets, which is hot for a tablet that’s only a half of a year old, experts say. The companies have not released exact figures. Forrester predicts the following sales of tablets—consumers buying their first tablets and consumers replacing tablets—in the years ahead: 37.9 million in 2012, 46.6 million in 2013, 53.2 million in 2014, 57.1 million in 2015 and 60.3 million in 2016.

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