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News surrounding the success, or lack thereof, of IT retail stores really ramped up during the recent holiday season. When Microsoft (NASDAQ: MSFT ) announced in December it would open an additional six retail outlets, it was generally well received by most. And why not? When you consider that Microsoft competitor Apple (NASDAQ: AAPL ) finished up 2012 with more than twice the sales per square foot as its nearest retail competitor, it's clear there's revenue to be had in retail.
Not just a neat idea anymore
Other than the odd store here and there, the notion that computer manufacturers would set up shop next to (yet) another Starbucks, usually tucked into the corner of some strip mall, seemed pretty unlikely. But the success of Apple retail outlets has made it abundantly clear: manning retail floor space isn't just a good idea, it's become a necessity.
It behooves Microsoft and the folks over in Cupertino to get heavy into the retail business, for a couple of reasons. As an R.W. Baird analyst recently indicated, relying on traditional electronics retailers like Best Buy and Staples to hawk your computing wares doesn't cut it. The analyst contacted representatives at the aforementioned stores and inquired about tablets. Inevitably, the analyst was referred to an iPad, Amazon.com's popular Kindle Fire, and a Google Nexus.
As for Microsoft's Surface Surface tablet, it was only mentioned after the analyst specifically asked about it. Why? Let's face it, the blue-shirted kid at Best Buy is going to go with what he knows, and he knows his iPad, Nexus, and Kindle Fire inside out. The new kid on the block, Surface? Not so much.
Another reason it's good to see more Microsoft stores is the sheer number of mobile computing alternatives. From Samsung's low-end Chromebook running Google's Android, to the new high-end 128 GB iPad now available at an Apple store near you, it's awfully easy to get lost in the crowd. And for Microsoft, especially as it's trying to make a dent in the hyper-competitive mobile market, standing out is a prerequisite for success. Now, with 11 more retail outlets slated for 2013, Microsoft can really begin to spread its wings.
Of course, depending on the day of the week and which "insider" you choose to listen to, Surface sales are either strong and steady, or woefully inadequate. But the new stores will help Microsoft beyond Surface; allowing consumers to see the new Office 365 and Windows 8 smartphone alternatives, among other things, certainly won't hurt.
Getting the word out on Windows 8 OS products -- be they phones, tablets, laptops, software rollouts, or desktops (yes, they still exist) -- will create a much-needed buzz and should add to Microsoft's overall sales momentum. Five new retail outlets, in addition to the six already announced, isn't necessarily a game-changer for a company that generates over $70 billion in annual sales, as Microsoft does. But the IT world is changing, and the new shops are yet another indication Microsoft is willing and able to change, too.
It's been a frustrating path for Microsoft investors, who've watched the company fail to capitalize on the incredible growth in mobile over the past decade. However, with the release of its own tablet, new retail outlets, along with the widely anticipated Windows 8 operating system, the company is looking to make a splash in this booming market. In this brand-new premium report on Microsoft, our analyst explains that while the opportunity is huge, the challenges are many. He's also providing regular updates as key events occur, so make sure to claim a copy of this report now by clicking here.