Surface to Surface
Cecil is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Microsoft (NASDAQ: MSFT) is the latest player to enter the tablet market. It has been a while since the first iPad released by Apple (NASDAQ: AAPL) took the world by storm, and now almost three years later, Microsoft decides to hit back. But is it too little too late? Or will the Surface RT be so convenient and complete that consumers will shy away from the iPad and switch to Microsoft's new product? These are obviously questions whose answers will be revealed in due course of time, but let’s attempt to break down what this new game plan for Microsoft is.
Microsoft recently launched the Surface with its flagship OS Windows RT. This is an important step forward for Microsoft, I feel. If you ask me, the main reason why Apple does so well with its products is that they integrate their hardware and software superbly. While individual hardware components may be made by different vendors, at the end of the day, Apple takes responsibility for end quality. And this gives you a lot more scope for improving the product.
It is quite logical, really. If Apple wanted to optimize screen resolution, for example, because they’re the ones that decide what hardware to use, they'll be able to ensure that icons are exactly how they envision them to be. Whereas traditionally, as we’ve seen with Windows, Microsoft licenses the software and different hardware makers power their systems with the OS. While this helps serve different target groups, since companies are given a free hand to use inferior hardware to make lower end systems, and use better hardware to make high end systems, the loser has always been Microsoft. Sometimes the OS is too bulky for the specs of the system in question, and people blame Windows when it hangs (not that Windows doesn’t hang on powerful systems either).
This has been one of the drawbacks of the Google (NASDAQ: GOOG) Android OS as well. It runs extremely well on high end phones--the Galaxy S and its offspring all run fine--but have you ever picked up a lower end Galaxy phone? It can’t do half the things that the S3 can. The fact is, though, it also probably cost 1/10th of the price of the S3. Yet, again, quality isn’t consistent.
This is why I think Microsoft has taken a great leap forward; they’re integrating their software with their own hardware. Microsoft is relying on the new operating system to revive interest in the personal computer and carve out a position for Windows in the tablets market, which is quickly picking up.
"Microsoft is all in to make Windows 8 vision a reality: Office, Bing, IE, MSN, SkyDrive, Skype, Xbox Music, Video and Games," says Microsoft CEO Steve Ballmer. He continues, "With Windows 8, we've brought together the best of both worlds. The PC and the tablet. Your work life and your home life."
The biggest problem that the Windows universe will face is the lack of apps. Apple is the runaway leader in this, with around 700,000 apps in the Apple App Store. Google Play has about 500,000 apps, so why would anyone pick an environment that simple doesn’t match up in that space? Well, it shouldn’t really worry people who are planning on picking up the Surface, because there is definite interest in developing for the Windows OS.
The company has had to add computers and people to process all the app submissions, according to Antoin Leblond, Vice President in charge of the Microsoft app store. Another advantage for Microsoft is that the apps being written are not just available for one platform, the Surface, but will also be available on Windows 8 personal devices. The only problem would be for the users of the Surface RT – they will find that apps written for Windows 7 will not run.
Analysts predict that Microsoft will ship 2.5-3.0 million Surface RTs and 750,000 to 1 million Surfaces for Windows 8 Pro in CY12. Microsoft is expected to generate between $1.8 billion and $2.7 billion in CY 12. The company is expected to generate total Surface revenues of $540 million for first-quarter FY13 and $1.5 billion for second-quarter FY13. In the short term, you aren’t likely to see much movement, but given Microsoft’s track record in OS, you could expect decent medium term growth. It may not be a bad idea to act now and buy.
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ceciljohn2002 has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple, Google, and Microsoft. Motley Fool newsletter services recommend Apple, Google, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.
