A Product Released This Week Might Determine Microsoft’s Future

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The future of tech giant Microsoft (NASDAQ: MSFT) could rest on the fate a product that will hit the shelves this weekend. Unlike BlackBerry, which purchased a Super Bowl ad to showcase BlackBerry 10, Microsoft’s product has received little fanfare, and most consumers probably aren’t aware that it’s coming.

And yet, should the device fail to sell, Microsoft’s future may be in jeopardy.

Microsoft’s Surface Pro will be available February 9

Coming about three months after the launch of the Surface RT, Microsoft’s Surface Pro will be available at retail outlets and online starting February 9. Although it shares the name “Surface” with the tablet launched last October, the Surface Pro is vastly different.

It is the first tablet built by Microsoft itself that will run the full version of Windows 8. For those not technically inclined, this means it is a tablet that can run any program written for Windows (to be fair, some programs that demand extremely powerful computers will likely not run well on the device).

Full Microsoft Office? Check. Adobe’s Creative Suite? Check. The Bloomberg Terminal? Check. Activision-Blizzard’s Diablo III? Check.

That’s cool, but why does Microsoft’s future depend on the Surface Pro’s success?

Microsoft’s business has long been dependent on enterprise -- business -- users. Microsoft may be able survive losing a chunk of the consumer market to Apple or Google (to some extent, it already has: tablet shipments are growing rapidly while sales of traditional PCs are declining), but it won’t survive losing businesses.

One of the single biggest threats to Microsoft’s enterprise business is the iPad.

As Apple (NASDAQ: AAPL) executives highlight at every Apple product event, the iPad is becoming increasingly embraced by business professionals: by doctors going from patient to patient; by restaurant hostesses seating guests; and by associates, checking out customers at remodeled J.C. Penney stores.

As more and more businesses embrace the iPad, more business-orientated software will be written for it, ultimately threatening Microsoft’s empire.

The Surface Pro should challenge Apple’s iPad

The Pro starts at $899 -- significantly more than the $499 base iPad 4 (and about three times the cost of the large Amazon Kindle Fire HD). So typical consumers looking for a tablet probably won’t be interested.

But for business users seeking to access their Microsoft Access on a tablet, or artists looking for a tablet that can run the full version of Adobe Photoshop, there will be few alternatives.

It is clear that Apple recognizes the threat. Not so coincidently, the Cupertino tech giant will release an iPad with 128GB of storage space starting February 5 -- just four days before the Surface Pro goes on sale.

Most consumers hardly need an iPad with that much storage. But businesses using larger and larger programs? This is increasingly necessary.

Microsoft might not be the only company that is relying on the Surface Pro

Unlike other tablets that run on ARM processors, the Surface Pro will be equipped with a traditional Intel (NASDAQ: INTC) chip. Over the last year, shares of Intel have been devastated (down over 20%) as its chips have been passed over in favor of ARM chips for mobile devices.

The Surface Pro base model runs Intel's i5 processor, the same processor used in many laptops, including Apple's MacBook Pro. Yet, despite the fact that Intel's chips are used in the majority of laptop and desktop PCs, sales of the company's chips slumped in 2012. In the third-quarter, the crucial back-to-school season, Intel's chip sales declined 8%.

If the Surface Pro is a success, it could mean that Intel’s technology is still relevant in a world that is increasingly shifting from traditional PCs to mobile devices.

It could also mean that similar tablets made by Microsoft’s OEMs -- Dell, Hewlett-Packard, Lenovo, etc -- would find eager consumers for their products.

At any rate, this Saturday will be key for the future of Microsoft’s Windows empire.


joekurtz has no position in any stocks mentioned. The Motley Fool recommends Apple and Intel. The Motley Fool owns shares of Apple, Intel, 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. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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