Microsoft Can Still Dominate the Tablet Market

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Microsoft (NASDAQ: MSFT) has finally released an Office app for Apple’s (NASDAQ: AAPL) iPhone. Interestingly enough, this app isn't available on the iPad.

That shouldn't be too surprising. At this point, Microsoft still has a chance to become a major player in the tablet market. The smartphone market? Not so much. If Microsoft acts quickly, it can still popularize Windows tablets -- and thereby halt Window’s seemingly inevitable decline.

Smartphone and tablet saturation

On a relative basis, the tablet market is far less saturated than the smartphone market. In the US, the smartphone market surpassed the 50% saturation point last year; on the other hand, only about one-third of adults have a tablet.

Moreover, there still appears to be room for innovation in the tablet space. As I've written previously, smartphones have more or less stalled since mid-2010. Meanwhile, tablet makers have continued to offer new form factors and devices -- the iPad Mini went on sale in November, Google’s Nexus 7 is just turning one.

Apple’s management has continued to emphasize that tablets remain in their infancy. CEO Tim Cook has predicted that the tablet market will eventually become larger than the PC market. That could happen as early as 2015, but at least for now, PCs are still outselling tablets by a couple hundred million.

In short, there’s still time for Microsoft to become a major player in the tablet space.

Microsoft’s campaign against Apple

In addition to excluding the iPad from Office, Microsoft has released a series of ads mocking Apple’s iPad, while at the same time emphasizing the superior features of Windows tablets.

Among other things, the iPad is incapable of handling SD cards and lacks split-screen functionality. Given the small size of tablet screens, and the increasing prevalence of cloud-based storage, the importance of these features is debatable. Nevertheless, Microsoft’s latest ads do have a certain brilliance to them, reminiscent of Apple’s old Mac vs PC ads.

Of course, Microsoft has quite an uphill battle to fight in terms of catching up to Apple. In the first quarter, Microsoft sold about 1 million Surface RTs -- in the same quarter, Apple sold over 19 million iPads.

As for Microsoft’s hardware partners, the situation is even worse. Microsoft’s Surface accounted for about half of all Windows tablets sold in the first quarter. This may be why Hewlett-Packard (NYSE: HPQ) has opted to start making Android tablets.

HP’s latest tablet, Slate 7, runs stock Android, and carries one of the lowest price tags on the market. The company will launch a higher-end Android tablet, the SlateBook X2, in August.

That isn't to say that HP is abandoning Windows tablets entirely. The company still offers them. But as Business Insider’s Julie Bort noted, HP’s CEO Meg Whitman has been avoiding the very mention of the word “Windows” in recent months.

The problem with Windows RT

The problem with Microsoft’s tablets isn't one of marketing. Rather, it comes down to the apps. Tablets running Windows RT may have the benefit of Office, but they fall far short in terms of other software.

On Apple’s App store, there are nearly 400,000 available iPad apps. The Windows store has only 60,000.

Granted, many of these apps are superfluous, but there are a number of key apps that Windows RT continues to lack. Such apps include staples like Facebook, LinkedIn and Pandora. Allybank is apparently working on an app for Windows Phone (not Windows RT), but the online financial institution clearly continues to favor iOS and Android when it comes to mobile.

A more aggressive program to get developers coding for Windows RT might help.

Can Microsoft break into the tablet market?

It might be a long shot at this point, but Microsoft still has a chance at becoming a dominant player in the tablet business. It’s far behind Apple, but with the tablet market less saturated than the phone market, and poised to grow significantly, Microsoft’s window of opportunity has not closed just yet.

However, it will have to make an attempt to aggressively court developers. Moreover, with partners like HP shifting Android, it might have to take the hardware side of things into its own hands.

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Joe Kurtz has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple 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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