Why is This Surface Screeching?

Umang 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) has been the czar of the operating system market. From MS-DOS to Windows, they created a monopoly over the market a few years back. But things have changed drastically over the last few years. The entrance of Google’s (NASDAQ: GOOG) Android and Apple’s (NASDAQ: AAPL) iOS in the smartphone market has led to different ball game altogether. Microsoft, with a sense of panic, has forced itself into one of its first hardware devices: the Surface.

What is so special about Surface?

Surface with Windows 8 is expected to arrive in January. It has 64GB SSD of storage, is 10.6 inches big, and has a resolution of 1,920 x 1,080 pixels. We also get 4GB of RAM, an Intel Core i5 "Ivy Bridge" processor, a USB 3.0 slot, Mini Display Port, and Wi-Fi.

The key difference between Surface and any other tablet on the market is on the software end. Windows 8 Pro behaves the same whether it’s on a desktop, laptop, or tablet, and all of the software you rely on when using Windows will work on the Windows 8 Pro tablet. Windows RT can also run certain specific apps that have been developed for the operating system. A Surface Pro will cost you $900 (starting model), which is around $200 more than Windows RT.

Is it really worth $900?

Microsoft’s Surface with Windows 8 Pro has been the talk of the town after the company announced its price a few days back. They must be relying on some factor (quite unknown) for selling the Surface Pro at such a high price. Already many issues have been reported for Surface RT, despite its high end configuration.

For instance, its battery life is not more than four and a half hours, much less than the other tablets on the market. The biggest asset that they have is the hybrid structure of this tablet. It may be able to perform the dual function of a PC and a tablet, but is this feature justifiable for the price tag of this device? Certainly not, which is why Microsoft will have a tough time selling this device.

Apple introduced its iPad 4 on Oct. 23, 2012. The fourth-generation iPad includes a Retina display, the new Apple A6X chip, and the Lightning connector introduced with the iPhone 5. They also introduced the iPad mini a few weeks back, which was designed to cater to the needs of people who required a more compatible device. They offer better features than Surface, not in terms of hardware, but with its software and applications. This gives Apple a better chance in capturing and maintaining the market share. Their share prices had zoomed upto $700 during the launch of iPhone 5, which was one of their all time highs. 

On the other hand, Google, with its Android operating system, is slowly eating the tablet market from Apple.  Apple’s worldwide tablet market share is expected to slip down to 53.8% in 2012 from 56.3% in 2011, while Android products would increase their share to 42.7% from 39.8%, as per the report from IDC. The primary reason being the open-source nature of Google's Android OS, which is very lucrative for many hardware manufacturers to try their hand at making an Android-based device. Tablets and smartphones are currently the sweet spot for investors, and thus everyone wants a piece of this pie. Google's Nexus 10 is the latest flagship tablet of Android. It boasts a higher definition and a greater pixel density than the Retina display in Apple's latest iPad

These two giants are posing big threat for Microsoft, and they are already the established players of the tablet market. Microsoft is targeting the hardware market with the Surface and the software market with Windows 8; but if they do not get their pricing correct then the journey would not be smooth. However, as per the report from IDC, Microsoft is expected to gain 10.2% of the tablet market share by 2016 from its current standing of a mere 2%. 

Conclusion

The drama of the new Surface will unfold in January (as expected) when Microsoft releases their tablet with Windows 8 Pro. Will they be able to capture market share despite the high price just based on their brand value and a superior hardware configuration? The bigger question is if the Surface outsmart the popular iPad? Stay tuned to find out.


Umang27 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. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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