iPad Killer?
Douglas is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
With Microsoft (NASDAQ: MSFT) poised to release not only Windows 8, but the new Surface tablet on Oct. 26, it is time to consider if the new device will have the disruptive force to change computing forever.
If the device is successful, the way consumers view the Apple (NASDAQ: AAPL) iPad, the Google (NASDAQ: GOOG) Nexus 7 and the Amazon (NASDAQ: AMZN) Kindle Fire HD may change dramatically. Not only is the Surface an attempt by Microsoft to survive, it potentially represents the largest shift in computing since the notebook was introduced. While I believe other tablets will maintain seats at the proverbial table, I believe the Surface is a game changer.
Consumption Meets Production
As I have been arguing since first seeing the basic design specs of the Microsoft Surface, the new device promises to be the first truly productive tablet available. The common limitation shared by the iPad, Kindle and Nexus 7 is that none is really built for productive purposes. They are great devices for reading books, watching video and surfing the internet from the comfort of your couch. They are not, however, designed to replace the functionality of a PC, laptop or otherwise.
While some may argue that the iPad can be used to write papers or manipulate spreadsheets, those functions are simply not central to the device’s raison d’etre. The Kindle and the Nexus 7 face the same limitations. Each of these products is designed to allow you to consume media and products, but not to create anything.
The Surface breaks with this trend by attempting to put the functionality of a laptop into the tablet form factor. One difference that is immediately apparent is that the Surface comes equipped with an external keyboard that doubles as a cover. Furthermore, the device, which will run on the new Windows 8, will be able to run the full Microsoft Office Suite. This is of critical importance in the business context because even those forward-thinking companies that wish to remain of the leading edge of technology must accept the reality that the home office likely runs Word, Excel and Powerpoint. The Surface will offer compatibility to those business people that will appreciate the smaller device but still need to be able to access, update and save existing company files.
The iPad Mini
Apple recently announced that it intends to release a new product – expected to be the iPad mini – on Oct. 23, three days ahead of the Microsoft launch. While some are applauding this as a laudable master stroke, I believe it is the type of critical strategic error that Steve Jobs would never have made. By trying to upstage Microsoft, Apple has done two things that are bad for the company and its image. First, the release date says to the world that Apple takes the Surface release seriously enough that it needs to be upstaged. Part of the Jobs genius was his oblivious attitude to the world around him. Apple never chose to race for the front of the pack, rather it said, “here is what we are doing, follow us if you can.” The competing release date is tacit proof that the Surface is already in the fight.
The second misstep represented by Apple’s competing release date is that the iPad mini is not even intended to compete directly with the Surface. The Microsoft device carries a price point expected to average twice as much as the iPad mini as is designed for a totally different audience. Where the iPad mini has been explained as Apple’s attempt to offer a smaller, less expensive device aimed at the lower-priced Kindles and Nexus 7, the Surface will be Microsoft’s flagship device. The proximity of the release dates, however, makes direct comparisons between the devices inevitable, and the iPad mini is not Apple’s strongest fighter.
While I am certain that this opinion will trigger a predictably Pavlovian defense of Apple by the truly faithful, causing me to be charged with everything from manipulation to sheer stupidity, I believe when you are winning the game – as Apple clearly is – making it easy for your opponent to change the rules is a mistake. The Surface has the potential to be a game changer on multiple fronts and Apple is just making it easier for Microsoft to prove it.
The Trade
As of this writing, Microsoft announced that its earning took a 22% hit and the stock is being punished after hours. Given the potential of Windows 8 and the Surface, I see any pullback as a great buying opportunity. It seems unlikely that the rollout being set days after what the company must have known would be weak earnings was a coincidence; this type of management planning is comforting as Microsoft steps back into the fray.
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Mr. Ehrman has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple, Amazon.com, Google, and Microsoft. Motley Fool newsletter services recommend Amazon.com, Apple, and Google. 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.
