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Microsoft's Next Shot at Apple

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One of the problems with being at the top is that you immediately become a target as contenders look to take over your title. Although Apple (NASDAQ: AAPL  ) has not helped itself with its precipitous fall from grace, it remains the name to beat in technology. Along these lines, Microsoft (NASDAQ: MSFT  ) , which recently released the Surface Pro tablet-PC hybrid, is making no secret of the fact that it is coming for Apple at every level. The next product that is likely to take aim at Cupertino is a Surface Mini -- some version of the Surface tablet in a 7-inch form factor. While reports on the Surface Pro are preliminary, the company seems to have struck a nerve with certain consumers. Regardless of your view of the new devices, Microsoft is executing and deserves a spot in your portfolio.

Watch out Apple
Microsoft's aim at Apple is hardly a new phenomenon. Last summer, CEO Steve Ballmer was very vocal about the direction his company planned to take. Since he made those comments, Microsoft has released the Surface RT, the Surface Pro, Windows 8, Windows Phone in partnership with Nokia, enhanced music services, as well as other releases. All have had the target of bringing Microsoft back into the spotlight and of taking direct aim at Apple.

The Surface Pro
While there were definitely some lukewarm reviews of Microsoft's recently released device, the Surface Pro has been well received in certain circles. According to a recent study from Forrester Research, the Surface Pro is the most coveted tablet among information workers; the study showed that roughly 32% of those surveyed wanted a Windows-based tablet as their next work tablet, coming in ahead of Apple's iPad. The numbers are based on 9700 interviews, but could translate to demand for as many as 200 million devices in the immediate term. This is the type of boon Microsoft needs to put it on the map in a segment that has been essentially owned by Apple.

While there is certainly an argument to be made that information workers are a unique and very technically focused group -- perhaps making them not the best subject of popularity research for a consumer electronics device -- this is a group that serves as a gateway for business. Apple fans may be quick to dismiss this news with "the geeks always want Windows," but given that they impact what products are used in enterprise situations, their opinion matters. A lot. The ability of the Surface Pro to integrate with existing systems, making for an easy rollout is a major advantage for Microsoft.

Lock and load
At an investment conference last week, CFO Peter Klein was very clear that Microsoft is ready to saturate the market with devices across the size spectrum. This means that the company is as prepared to release devices ranging from the smartphones all the way to the large desktop PC and everywhere in between. Klein said, "The notion of flexibility and scalability of the operating system is intrinsic to our strategy." This means that a central message of Microsoft is that it is not done releasing devices branded with its own name.

One of the most likely form factors that is anticipated is the 7-inch tablet  size. This size will target Apple's iPad Mini, which itself was a response to the smaller tablets that have sprung up from a wide range of places. The smaller size, which is essentially the intersection between the e-reader and the tablet, has arguably become the most popular size for tablets today.

The challenge for Microsoft will be managing the weight and size of such a device within the framework of the Surface family. One of the chief complaints about the Surface Pro was that it was too bulky and heavy to be fully practical as a tablet. The Surface Pro was larger than the Surface RT, presumably to accommodate the hardware requirements of the more powerful device. If this overall size is to shrink again, it will be interesting to see how Microsoft attacks the problem. If the smaller screen requires too thick a device, it is not likely to be successful.

Ultimately, Microsoft's next assault on the Apple nation is likely to be with a smaller tabletdesigned to attract the business user, but able to adapt the smaller footprint. Microsoft is coming after Apple relentlessly and whether you believe it will ultimately be successful, there can be little doubt that it has fought its way back into the conversation. As such, I am very bullish on the stock and think it deserves an allocation in your portfolio.

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, 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.

Read/Post Comments (6) | Recommend This Article (6)

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  • Report this Comment On February 15, 2013, at 6:14 PM, cpatricks wrote:

    I find the SurfacePro to be very intriguing. A hybrid Apple fan and Windows is everywhere-else-realist, the debate about what folks want to use is interesting.

    On one hand, to be able to run real, honest to goodness Windows apps on a nicely implemented tablet form factor, that is really a flat PC, is generally going to be liberating and helpful.

    On the other...the pinch to zoom, touchscreen, app-driven paradigm that has evolved into normalcy for us using tablets and touchscreen phones (iPads and iPhones) is a very different way to interact with applications. Even the very nature of the truncated word app gives evidence as to how we think of hand-held computing.

    Meaning, I'm rather suspect as to whether we'll like the experience once we have all manner of applications that weren't designed as touchscreen tablet apps available on same in the form of a SurfacePro.

    I have experimented with technologies that allow me to access my Windows programs within an app on my iPad. For a minute, it looks like a miracle. After a while, you realize it's a mess. Until Windows application writers consider the hand-held touchscreen device in their coding, I think we're going to be less than impressed.

    It would seem a somewhat eye-opening experience for the WinApplication vendors, and the WinOS vendor, to wrestle with creating additional layers or code to provide compelling apps that know how to act in 10", 7", 5", 4" screen sizes.

  • Report this Comment On February 15, 2013, at 9:05 PM, asH95 wrote:

    Ya know,Ive been thinking the same thing about MS. These are some otherr key factors for me that suggest that MS is gearing up at an attempt at an Apple like biz model (but better if executed). The 'Forrester Research' polls eluded to were eye openers to me when I first saw them a few days ago, as well as the Skype stats, wPhone gaining traction, Nokia's deal with China Mobile (Win OS), Xbox domination, Lync increased usage in enterprise, and a few more things i cant think of at the moment that add to a positive bottom line. But these are just the surface things (pun intended). When you look deeper into Windows 8, you find that security is in there- Secure Boot, for BYOD there's Windows To Go, and TPM tech, seems to me like a nice enterprise security package; can the iOS do that? What if HP/Android, Qualcom/Windows, Windows/ARM, Apple's discounts of the MacBook pro13" more of a jab at Intel- I asked for a laptop they gave me a clam, I wanted a tablet, they showed me a TV, "Here's Johnny". remember when we first heard of Windows and ARM a few years back, how it sent shock waves. Suppose the ARM license Windows has is for their own chip (like Apple) or hybrid ARMv8/x64 chip, that hasnt been made yet - He who owns the compiler owns the platform - (ask Intel)...whats a AMP C++ for (can it do ARM8). DirectX 11.1, WARP was enhanced with support for DirectCompute (Massive parallel computing on GPU), among other things, can Intel do that? And YES Microsoft opened a production studio in Santa Monica, how bout that. Its no wonder Apple is asking for Office

    I'm just sayin - do your own homework,


  • Report this Comment On February 15, 2013, at 9:29 PM, Mustanghoot wrote:

    I have always, since DOS days, been a huge Microsoft fan. But I find myself now drifting slowly, but steadily to an all Apple user. I installed Windows 8 on 3 personal machines the weekend it came out, disappointed today, nice but not a game changer. Apple OS are still better. I now use an IPAD, IPHONE , and IPOD. Looking at a Apple laptop now that prices are coming down. I don't think there is much chance for Microsoft to challenge Apple until it gets rid of Balmer and stops trying to be another Apple. Microsoft has a lot of cash, mostly off shore, but if they keep making bad investments that will be gone quickly. If Apple were to reduce its pricing 10% accros the board, Microsoft, Samsung and others would be in serious trouble.

  • Report this Comment On February 15, 2013, at 10:14 PM, techy46 wrote:

    It's all about Windows 8 opening up mobile to a whole bunch of ODM's just like Android. It's not all about Surface Pro which is a silly little side show. There's going to be dozens of Yogas and Helixes in a copule more months.

  • Report this Comment On February 16, 2013, at 4:47 AM, asH95 wrote:

    and Dell

  • Report this Comment On February 16, 2013, at 5:08 AM, asH95 wrote:

    Exactly Techy.

    Microsoft must decouple itself from Intel to realize its growth potential....what a pop it should be, if all else is correct

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