Does Lenovo's Recent Move Destroy Any Chance of Microsoft Releasing a Surface Mini?

Microsoft (NASDAQ: MSFT  ) was widely expected to announce a mini Surface back in May. The device, which was believed to feature an 8-inch touch screen, never materialized: Instead, Microsoft launched the Surface Pro 3.

Microsoft has never officially confirmed the existence of the much-rumored Surface Mini, but references to the device have been found in the Surface Pro 3's manual. In time, Microsoft could launch a miniature Surface, but for now, its hardware partners are on their own, competing with, among other devices, Apple's (NASDAQ: AAPL  ) iPad mini.

That could be a mistake, as the demand for Windows tablets remains muted.

Lenovo's plans for 8-inch Windows tablets
Lenovo, Microsoft's largest hardware partner, caused a stir last week when it suggested that it was getting out of the 8-inch Windows tablet business. In January, the Chinese OEM introduced the ThinkPad 8 -- an 8-inch tablet running the full version of Microsoft's Windows 8 operating system. Given its size, price tag, and high-resolution screen, it was the closest thing Microsoft's Windows had to a retina-equipped iPad mini competitor.

I say "had" because the device's days are limited, at least in the United States: Lenovo has stopped selling the tablet in the U.S. after just a few months on the market. Some, including PCWorld, interpreted Lenovo's move as a declaration that it was getting out of the 8-inch Windows tablet market completely. That's not the case -- in a follow-up statement, Lenovo clarified that the ThinkPad 8 would continue to be sold in select markets, and that it was planning to release additional 8-inch Windows tablets in the future.

Nevertheless, it's still not a particularly encouraging sign for 8-inch Windows tablets: Unfortunately, Lenovo gave no exact sales data, but if it was willing to pull the product after only a few months on the market, demand must have been especially poor.

Apple's iPad Mini continues to grow in popularity
To some extent, this disappointing demand could be explained by a lack of interest in the 8-inch tablet form-factor, as Lenovo continues to sell its larger, 10-inch, Windows-powered tablets. The growing popularity of larger smartphones has, according to research firm IDC, begun to weigh on the market for tablets, and with Apple expected to release a larger iPhone in the next few months, this trend could only continue.

However, if it is a factor, it may be limited to Microsoft's operating system, as the popularity of Apple's iPad mini has continued to grow. According to a recent survey from Consumer Intelligence Research Partners, the iPad mini, as a percentage of Apple's total iPad sales, is steadily increasing, up slightly from last year.

Notably, the demand for Windows-powered tablets in general has been poor: IDC's most-recent data pegs Microsoft's first-quarter tablet market share (including 2-in-1 devices) at around 3%.

Microsoft's tablets remain far behind
In the wake of Lenovo's announcement, some have concluded that Microsoft was smart to not release a Surface Mini -- why release a product when there's no market for it? Yet, Microsoft's stated ambitions with its Surface program are not to compete with its hardware partners, but rather to help pioneer and grow the market for Windows-powered devices.

In that case, a miniature Surface could be necessary, particularly with the world's largest PC vendor pulling the plug on what has been the best-in-class 8-inch Windows tablet.

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Sam Mattera

Sam has a love of all things finance. He writes about tech stocks and consumer goods.

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