Microsoft Ups the Ante in the Tablet War
Muhammad is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
In a stock market that is dominated by technology companies, Microsoft (NASDAQ: MSFT), once the largest company in the world, now ranks as the fifth largest behind nemesis Apple (NASDAQ: AAPL), which took the coveted top spot in August of 2012. As of the beginning of October, Google (NASDAQ: GOOG) has also surpassed Microsoft, slipping firmly into fourth place. It appears as though PC leviathan Microsoft is fast becoming a victim of the mobile device era. Even though the company posted fourth quarter record revenues of $17.41 billion at the end of last year, profits were down 2.4% from the same quarter the previous year.
Sluggish PC sales aside, a large portion of the loss can be attributed to direct competition with Apple and its revolutionary iPad gadgets. People are enamored with anything handheld these days, and Microsoft is in the unenviable position of playing catch up in this arena. Purchases of tablets have made deep cuts in PC profits across the board. Even Google has made significant inroads with its extremely popular Android-based Nexus 7 tablet.
But Microsoft is hitting back with the introduction later this month of its highly anticipated Surface tablet, which will run on the new Windows 8 operating system. The corporation is hoping that its hybridized cross between a tablet and a PC will be the ultimate ‘iPad killer.’ Some analysts speculate that the Surface is more about placing Windows 8 squarely in the mobile world than killing off the iPad. ; but whatever the angle, this marks the first time that Microsoft is manufacturing its own Windows-based device, rather than designing innovative software for other companies’ hardware. This puts the company in direct competition with partners such as Dell (NASDAQ: DELL) and Samsung, which both have hardware that runs on the Windows operating system.
Microsoft is by no means an ailing company. PC sales may be down, but sales are up in other areas, such as the Windows operating system and the Xbox video game console. Microsoft has brainstormed and produced some of the best software in history and the corporation was built on the backs of the PC and its revolutionary software. The company is still the leader in desktop operating systems and no other corporation can come close to what Microsoft has accomplished in this market.
With the holiday season fast approaching sales will undoubtedly climb, especially with the new products being released at the end of the month. Even so, Microsoft is hedging its bets by opening pop-up stores across the country. The store openings will coincide with the launch of the Surface tablet and Windows 8 operating system and will remain open throughout the holidays. The company plans to open 32 outlets in the United States. Analysts expect an interesting holiday sales season with a virtual showdown between Apple, with its new iPad Mini, Microsoft with its new Surface, Amazon (NASDAQ: AMZN) with its Kindle Fire HD, and Google with its new 32GB Nexus 7. Only time will tell which company will garner the largest portion of the tablet market; just don’t count Microsoft out.
The bottom line is that Microsoft is still a great investment for many reasons. Stepping into the tablet market is a very sound move on the part of Bill Gates’ company. Microsoft has always been able to reinvent itself in order to keep up with or stay ahead of the competition. The price of the stock is attractive to investors, selling for $29.28 at the close of market on Oct. 9. Analysts are bullish on the company, and with good reason; there is every indication that the release of the Surface will boost sales dramatically and compensate for the 2.4% loss in PC sales last year. Microsoft is betting that it can make a huge impact with its tablet, and that consumers will fall in love with the Surface and the new Windows 8 operating system.
Compare and Contrast
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