Is This Why Microsoft Corporation Skipped a Surface Mini?

Included with the acquisition of Nokia's mobile unit were a couple of devices that could help explain why the software king opted against a mini-tablet.

Jul 10, 2014 at 3:30PM

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.

Leaked: Apple's next smart device (warning, it may shock you)
Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early-in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!

Tim Brugger has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple 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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