Did the Surface 3 Just Challenge Apple Inc.'s Macbook Air?

"This is the tablet that can replace your laptop," Microsoft's (NASDAQ: MSFT  ) Surface executive Panos Panay said at a Tuesday event in New York after the software giant unveiled the Surface 3. In fact, the Surface 3 even challenges Apple's (NASDAQ: AAPL  ) Macbook Air, Microsoft said.

Surface 3. Image source: Microsoft

With the 12-inch laptop-tablet hybrid, Microsoft, finally displayed some clear direction for the Surface line. It's positioning the Surface 3 as a replacement to the notebook and as a showcasing device for its services. While it's nice to see some direction, the obstacles Microsoft faces in hardware may still be too challenging.

Apple's a tough competitor
Throughout the launch event, Microsoft repeatedly compared the Surface to Apple's Macbook Air. In one comparison, a Microsoft executive placed the Surface 3 on a scale to show that it was lighter than Apple's 13-inch Macbook Air -- an interesting comparison since the Surface is clearly shaped like a tablet and has a smaller display.

But there's a problem about positioning a device up against Apple's Macbook Air. When it comes to hardware, Apple is an experienced and proven competitor -- not just because of the hardware itself, but Apple's OS X operating system is increasingly gaining traction as a first choice among consumers. In the U.S., for instance, Apple's Mac sales have been gaining share for years. OS X computers made up about 13.7% of PC sales in the fourth quarter of 2013, according to data from Gartner. That figure is up from less than 7% in the same period in 2006.

Macbook Air. Image source: Apple

There's undoubtedly rationale for Microsoft's decision to position the Surface against notebooks. Panay explained during the event that 96% of consumers who own an iPad also own a notebook. The Surface 3, he says, is aimed at "taking that conflict away." In other words, if the Surface 3 can really fill the role of both notebook and tablet then Microsoft could hit a homerun. Of course, this is easier said than done. And looking at those same stats in a different light, it could be argued that consumers have shown a clear preference to own both types of devices.

Could Microsoft have positioned the Surface better if it launched the rumored Surface mini instead and aimed it at the popular small tablet category? Not necessarily. Facing off against Google's Android and Apple's iOS wouldn't be any easier. The mobile device market is an Apple- and Android-dominated world.

An uphill battle
No matter what type of hardware Microsoft launches, the software giant is up against some big challenges. With its Windows operating system losing market share and its hardware business arguably remaining at a standstill at best, it's still unclear whether Microsoft should be focusing on hardware at all.

But these challenges don't automatically mean the company is doomed to failure. Fortunately, Microsoft has other great things going for it. For instance, its cloud and server solutions for enterprise, Microsoft Office, and its gaming segment are all great businesses. And there could even be a noble purpose for Microsoft's hardware: As Microsoft CEO Satya Nadella explained during the launch event, its hardware sales serve as showcasing devices for Microsoft's broad array of software and services.

Further, the risk of downside from Microsoft's hardware business is balanced out by the potential upside opportunity. So, even though the outcome of its Surface line is still uncertain, a smidgen of more clear direction, even if the Surface doesn't look ready to challenge the Macbook Air yet, is good news.

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  • Report this Comment On May 21, 2014, at 4:15 PM, twolf2919 wrote:

    Do you really think the Surface 3 Pro can challenge the MacBook Air, given the way Microsoft priced it?

    $799 gets you a tablet - you need to add a $130 keyboard to make it be the productivity tool Microsoft claims it is. So that's $930. And you still need to add MS Office (not bundled!) The low-end MacBook Air is $899 - for a real laptop that can be put on your lap and which includes an office suite.

    Take weight and battery: the Surface is 1.7 lb - but with the keyboard, you're pushing 2 lbs....not much lighter than the Air's 2.3 lb. Both advertise a battery life of 9 hours...but for $999 - still cheaper than a Surface with a keyboard and MS Office - you get a bigger 13-inch screen, more storage, and 12 hours of battery life.

    To be fair, the Surface 3 Pro can be used as a tablet - and the MBA obviously cannot. But I wonder how many people really want a 12+" tablet? 7-10" seems to be the sweet spot for portability.

  • Report this Comment On May 21, 2014, at 5:47 PM, marv08 wrote:

    "Panay explained during the event that 96% of consumers who own an iPad also own a notebook. The Surface 3, he says, is aimed at "taking that conflict away."

    Sheesh... So much for thinking removing Ballmer would bring some sense back into MS. What conflict? I have a bicycle and a car, a radio and a TV, even a fridge and an oven. Want to solve these conflicts, too?

    I won't lie in bed reading a book on a 12" behemoth, and I won't try to edit our ridiculous accounting sheets using a wobbly keyboard with a miniature trackpad, balancing the whole mess on my lap or trying to fit it onto an airline seat tray...

    Horses for courses is what wins every time. And for the price of a fully equipped Surface 3 with keyboard I can buy a 13" Retina MacBook Pro (one of the best laptops on the planet) and an iPad Mini. This combination beats the Surface at absolutely everything. Not having to use Windows 8 is a free bonus.

  • Report this Comment On May 21, 2014, at 6:11 PM, twolf2919 wrote:

    @marv08,

    I'm with you completely - until you mentioned being able to get a 13" MBP plus an iPad Mini for the price of a fully configured Surface. The former will set you back $1500, the latter $1130 ($995 for an i5 based Surface + keyboard). Yes, an i7 based surface would be $1500+, but that would no longer be an apples-to-apples comparison with the entry-level MBP which is i5 based.

  • Report this Comment On May 21, 2014, at 6:22 PM, makelvin wrote:

    @twolf2919, I think you also forget to mention the fact that the Surface Pro 3 base price unit will only get you a Core i3 processor while the MacBook Air at $899 will get you a Core i5. Secondly, the same MacBook Air will come with 128GB of flash storage while the Surface Pro 3 will only have 64GB. For those people who constantly think that the Apple's hardware is too expensive; Microsoft has just stepped up a notch from Apple in terms of expensive computers and hardware. Congrat Microsoft.

  • Report this Comment On May 21, 2014, at 6:31 PM, marv08 wrote:

    @twolf2919: Well, the entry-level MBP with 13" Retina screen, 128 GB SSD and a 2,4 GHz dual core i5 is $1,299 and you can easily find it for $100 less. We do not know the full specs of the CPU and storage used in the Surface 3, but it will most certainly not have PCIe based SSDs and due to the limited ventilation I absolutely expect a lesser i5 CPU, so we might not look at apples to apples anyhow.

  • Report this Comment On May 21, 2014, at 6:42 PM, makelvin wrote:

    @twolf2919, Actually, @marv08 is not completely wrong, except that he should have used MacBook Air instead of MacBook Pro.

    A fully loaded Surface Pro 3 with i7, 8GB RAM and 512GB storage is priced at $1949 without the $130 keyboard cover. So the total price with the keyboard would be around $2080.

    A similarly configured MacBook Air with i7, 8GB RAM and 512GB is priced at $1749. So combine that with the iPad mini at $299, the total cost would be less than $2050 which is about $30 less than the fully configured Surface Pro 3.

  • Report this Comment On May 21, 2014, at 7:51 PM, daveshouston wrote:

    No way. It's a clunker. What Microsoft is trying to do here is extend the life of their thirty year old Office Suite which was obsolete many years ago. Windows sucks. Office Sucks. Their whole ecosystem sucks.

    It is good that they finally booted Steve Ballmer to the sidelines. That was way way overdue. The new CEO seems bright enough but he's stuck with the products they already have.

    Get an iPad. Get an iPhone. Get a Mac. Blow off Microsoft. You'll be a happy camper.

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