Microsoft's Moment of Desperation

Microsoft being a latecomer to the tablet space is responding in desperate ways to make people buy its tablet PC. The problem is that MacBook's were never about price, but about performance,

Jul 8, 2014 at 10:00PM

Microsoft (NASDAQ:MSFT) recently pulled a marketing and sales stunt that surprised everyone. In an attempt to sway devoted Mac users over to Microsoft's new Surface Pro 3 tablet, it's offering a $650 rebate to consumers to trade up to Microsoft's new Surface Pro 3, provided they hand in their MacBook Air in working condition.

However, Microsoft's work is cut out for it in more ways than one. Not only will taking market share from Apple (NASDAQ:AAPL) not be easy, but gaining traction in the tablet space will be just as hard. 

Apple's market share has been immune to the PC slide
Apple has been gaining market share even as PCs shipments have trended lower. According to Gartner, U.S. Mac sales spiked 28.5% year over year in the fourth quarter of 2013, giving Apple a 13.7% share of the U.S. market even while the PC industry continues to struggle.

According to Apple, thanks to strong MacBook Pro and MacBook Air sales, Macs have gained global market share for 31 of the last 32 two quarters.

This is a trend that might continue, especially now that Apple has lowered the price barrier to the Apple ecosystem. Apple's new 21.5-inch iMac costs only $1,099, while the new MacBook Air starts at only $899. 

Apple has a very loyal consumer following 
Devoted Mac users aside, according to the American Customer Satisfaction Index, Apple has been topping Customer Satisfaction Benchmarks in the PC category for over a decade now.


Source: American Customer Satisfaction Index 

You don't score No. 1 year after year without a reason. No matter what investors might think of Apple products, consumers (customers) think very highly of Macs. It's no wonder, either, just days after the Surface Pro 3 went on sale, buyers began grumbling about poor performance on Wi-Fi networks using the 802.11ac standard.

More juice is better
One of the reasons why the MacBook Air got to be so popular is because its battery lasts anywhere from 9-12 hours depending on the model. Microsoft claims that the battery of the Surface Pro 3 can last you up to nine hours. This is good, but if you want the longest-lasting laptop on the market, then the MacBook Air is still the best choice.

Microsoft's Surface Pro 3 is not a bargain 
If one wants to compare apples-to-Apples (pun intended), then one has to add the extra cost of a keyboard to the Surface Pro 3. When all is said and done, the Surface Pro 3 will cost you a total of about $1,129. The total cost comes down to $479 with the $650 rebate. However, while Microsoft might persuade a few Mac addicts to buy the Surface Pro 3 for $479, I am not so sure how many more MacBook Air owners will be persuaded once the special offer ends. Please keep in mind that the $1,129 price tag is for an entry-level Surface Pro, and for the same price you can buy the top-of-the-line MacBook Air.

Microsoft might be too little too late in the tablet game
IDC's Tom Mainelli, research director for Tablets, had this to say a while ago:

It's becoming increasingly clear that markets such as the U.S. are reaching high levels of consumer saturation and while emerging markets continue to show strong growth this has not been enough to sustain the dramatic worldwide growth rates of years past. We expect commercial purchases of tablets to continue to accelerate in mature markets, but softness in the consumer segment—brought about by high penetration rates and increased competition for the consumer dollar—point to a more challenging environment for tablets in 2014 and beyond.

That's not to say that Microsoft will not be able to gain market share in the tablet space, but it will be a challenge. For example, according to IDC, while Apple grew it tablet business by 13.5% year over year, Samsung (NASDAQOTH:SSNLF) registered 85% growth year over year . In a strange way, Microsoft might be better off giving a rebate to Samsung users than Apple users.

In fact, even if we assume Microsoft manages to take some business from Apple, Google (NASDAQ:GOOG)  might be an even bigger competitor. According to the NPD Group, Chromebooks accounted for 21 percent of all business and educational notebook sales in 2013, up from a negligible share in 2012. And with Lenovo, Hewlett Packard Samsung and Acer also entering the Chromebook space,  Microsoft will have its hands full trying to compete for a segment of the laptop and notebook space.

Bottom line
Being a latecomer to the tablet space, Microsoft is responding in desperate ways to encourage people to buy its tablet PC. The problem is that MacBooks were never about price, but about performance; Microsoft might be barking up the wrong tree. In addition, the fact that Apple ranks so highly in customer satisfaction and that the Surface Pro 3 is not that much of a bargain (without promotional discounts) will make Microsoft's job even more difficult. 

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George Kesarios has no position in any stocks mentioned. The Motley Fool recommends Apple, Gartner, and Google (C shares). The Motley Fool owns shares of Apple, Google (C shares), 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.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't 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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