Is This Why Microsoft Corporation Skipped a Surface Mini?

Tech rumors -- there's no avoiding them. There certainly is no shortage of industry pundits climbing over each other to be the first to "confirm" a new device or strategic initiative. One look at the laundry list of Apple (NASDAQ: AAPL  ) iPhone 6 "leaks" over the last several months is a testament to that. But by no means is Apple the only tech enterprise subject to scuttlebutt.

Leading up to the May introduction of its "tablet that can replace your laptop," the Surface Pro 3, Microsoft (NASDAQ: MSFT  ) was widely expected to unveil a competitor to Apple's iPad mini. What Microsoft did instead was even better: it essentially brought to market a niche form factor -- or at least the intention to market the Surface Pro 3 as one. Nice move, but still, no mini. However, based on some recent data, perhaps there was some method to Microsoft's non-mini tablet madness.

Bigger phone, or smaller tablet?
About the time Microsoft wasn't introducing a mini tablet in late May, research firm IDC issued some intriguing tablet sales expectations for this year and beyond. And IDC's projections for tablet sales dovetail with additional tablet sales research released in just the last couple of days.

When IDC lowered its tablet sales expectations for 2014 from nearly 261 million units to 245.4 million, there were two primary culprits: fewer users want to swap out their old tablets for the latest, greatest model, and, more interestingly, the rise of the phablet is expected to impact mini-tablet sales beginning this year. And the phablet phenomena will likely continue over the next several years.

Smartphones with a screen 5.5 inches or larger are generally considered phablets. The problem, says IDC, is that tablets like Apple's iPad mini, with its 7.9 inch screen, will have difficultly differentiating themselves from phablets, including Microsoft's Lumia 1520 with its 6-inch screen. There are even larger phablets available, and they're beginning to catch on. In Q1, according to IDC, phablet shipments more than doubled to 30.1 million units.

Coincidentally, Apple itself is rumored (there's that word again) to be rolling out its iPhone 6 this fall. One of its most defining new features? Its 5.5 inch, phablet-sized screen. Concerns regarding its own and other new phablets eating away at iPad mini sales are justified, as IDC stated and market research firm NPD DisplaySearch recently confirmed.

For Microsoft, less is more
With the deal for Nokia's devices and services unit complete and the integration under way, it makes sense for Microsoft to cool its device manufacturing heels for a bit. Particularly when it already has what some industry insiders suggest is the best smartphone for gaming on the planet, the Lumia 1520 phablet.

It's nearly impossible to go outside and not see gamers glued to their smartphone screens playing one of the myriad of games available. The statistics are off the charts: gamers love their games, and they like them on their smartphones. That, combined with a trend toward buying phablets in lieu of mini-tablets, should be all the impetus Microsoft needs to get behind the Lumia phablets.

Interestingly enough, IDC seems to think so too. On the one hand, consumers' shift to smaller devices in lieu of mini-tablets will help drive growth in Windows devices, to more than double its existing market share. Surface Pro 3 sales will also benefit, IDC believes, as the market for "tweener" devices shifts to either phablets or larger screen devices like Microsoft's new pseudo-tablet.

Final Foolish thoughts
Microsoft has done a masterful job of marketing Surface Pro 3 as a niche player, the "tablet that can replace your laptop." The question is, when does Microsoft give its marketing department the kick-start it needs to market its phablets, the lower-end Lumia 1320 and top-of-the-line Lumia 1520? Based on what appears to be the correct decision to forego a mini, the answer to when Microsoft should begin marketing its phablets is easy: yesterday.

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Comments from our Foolish Readers

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  • Report this Comment On July 10, 2014, at 4:13 PM, marv08 wrote:

    "Microsoft has done a masterful job of marketing Surface Pro 3 as a niche player, the "tablet that can replace your laptop."

    Did they? Out of my over 400 rich-kid students not one did bite, and I don't hear anybody in the industry even talking about it. As far as I can tell, it came and went like the ones before it. Outside of the temples of lunacy (The Verge, Engadget, blah...) this device is as real as a unicorn and as present as the dodo bird.

    MS did not kill the Surface mini last minute because of phablets, but because Sanella was intelligent enough not to risk writing off another billion $$$.

  • Report this Comment On July 10, 2014, at 4:16 PM, JJ82 wrote:

    This is ridiculous.

    How is calling it a tablet to replace your laptop marketing it as a niche item?

    Face it, they tried to make a mainstream item however once again their arrogance has created a an item that will be niche, because their grand vision, is actually a narrow one that cost them their grasp on consumers wants and needs.

    They dropped the mini because it actually stood a CHANCE at selling well, thus they believed it wouldn't, because they just plain don't have a clue anymore.

    Microsoft needs a purge of these yes men that served under Ballmer.

  • Report this Comment On July 10, 2014, at 4:18 PM, kwright62 wrote:

    It was a good decision. As in the past, our tools will become faster and smaller.


    The only exception to this pattern seems to be phones! At some point they may meet in the middle but the current market is primed for a large touch screen tablet computer augmented by a capable phone/phablet.

    Microsoft probably has the Small Surface ready to launch if needed in the future.

  • Report this Comment On July 10, 2014, at 5:46 PM, CSharpGuy wrote:

    The mini make sense as a pure tablet - no desktop. That means Touch Office, and probably Win 9. The hardware was fine, it was the software that makes sense on that form factor that wasn't ready.

  • Report this Comment On July 13, 2014, at 11:10 AM, salmoor wrote:

    When are YOU going to realize that being seen in school with a Microsoft brand name will crush your reputation with your peers. Unfortunately, nobody in school wants to be seen with a MS product because everyone says its not Ame'arican made. The PERMANENT reticule/outcasting by your classmates as you ruin your life promoting a product with a life cycle of less than six months.

    If you compare MS mobile devices with the competitors you will find that it compares evenly in design and function and cost, yet the data shows a serious problem. The data does not equate the numbers of users on the other devices. Redmond does not have enough customers to justify going all-in on something nobody wants. The market fools push technology down consumers throats, yet consumers say that mobile is overrated. Being connected 24/7 to work without getting paid is productive only to the companies, not to the user. The country is not supporting this company for a reason. Maybe if they stopped marketing and listened.

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Tim Brugger

Tim has been writing professionally for several years after spending 18 years (Whew! Was it that long?)in both the retail and institutional side of the financial services industry. Tim resides in Portland, Oregon with his three children and the family dog.

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