Why is Microsoft Corporation Surging Today?

Microsoft shares rose 1.2% in early afternoon trading, making it one of the strongest performers on the Dow today. What's driving Redmond higher?

May 21, 2014 at 2:00PM

SpanShares of Microsoft (NASDAQ:MSFT) were up 1.2% as of 2 p.m. EDT, making the tech giant one of the strongest performers on the Dow Jones Industrial Average (DJINDICES:^DJI) today. Overall, the Dow is up by 0.9%, with 27 of its 30 components trading in the green. 

So why is Microsoft off to the races today?

The answer comes in two parts. First, the company announced a new tablet that might actually make a dent in the portable computing market. Then, Microsoft pre-announced a system software update for the Xbox One gaming console, which will bring a couple of much-requested features to the table.

Microsoft's Surface Pro 3, complete with keyboard cover and stylus. Source: Microsoft.

What Microsoft did and didn't do in the tablet space
Redmond was expected to introduce a slew of new Surface tablets this week, focusing on a smaller and less expensive Surface RT model. Instead, the company simply unveiled the Surface Pro 3, a thin and light business-class tablet with a choice of Intel (NASDAQ:INTC) processors inside.

The tablet itself is impressive, promising to replace corporate laptops without hurting your productivity. And while it isn't exactly configurable, like built-to-order Dell laptops, Surface Pro 3 does come in several pre-configured versions ranging from $799 to $1,949 per unit. All of them are built around with Intel's laptop-grade Core chips, starting with Core i3 at the low end and with the top-of-the-line Core i7 product powering the most expensive versions.

Moreover, Microsoft didn't announce a smaller Surface this week, or at least not yet. Surface Pro 3 clearly aims to steal market share in the laptop segment rather than butting up against the entrenched leaders in tablet sales, and this focus should serve Microsoft well.

Powering up the Xbox One
In a blog post, Microsoft announced two new features for the Xbox One, which will be enabled in a June update to the system's software.

Xbox One

For one, we Xbox One owners will be able to attach external hard drives via the built-in USB ports, multiplying our storage capacity many times over. That could mean installing more games, or saving more game-play videos, or storing large media libraries on the external disk. Moreover, you can save your game progress on the external space, take it to a friend's house, and keep playing from there.

Hard drives are cheap these days, and this move will make the Xbox One a much more capable media center. The gaming benefits are smaller, but anything helps. Xbox One hasn't exactly crushed the game console market so far, and Microsoft should bend over backward to provide a more user-friendly gaming experience.

Also, the list of Xbox Live friends on your console will become less cryptic. Rather than the often indecipherable user names you see today, this update will enable the display of real names. So, Steve down the street might show up as "Steve Peterson," rather than "Steve-O_46" or whatever.

That's another usability improvement, small but potentially important. These tweaks come right alongside the plethora of previously announced Xbox Live improvements for June, and all of these minor changes add up in the long run. Keep this up, and the Xbox One will challenge its major rivals in a big way when the next holiday season rolls around.

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Anders Bylund owns shares of Intel. The Motley Fool recommends Intel. The Motley Fool owns shares of Intel 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.

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