Microsoft Surface Pro 3 Takes Aim at the Macbook Air -- Again

Microsoft's latest ad urges consumers to consider its competing tablet hybrid.

Aug 29, 2014 at 2:30PM

Microsoft's (NASDAQ:MSFT) latest ad campaign pits its Surface Pro 3 against Apple's (NASDAQ:AAPL) Macbook Air. Emphasizing its superior specs, utility, and customization, Microsoft appears bent on selling its latest laptop/tablet hybrid to would-be buyers of Apple's Ultrabook.

Although the Surface Pro 3 comes out ahead in several key areas, it doesn't seem likely to unseat Apple's Macbook Air.

Jack of all trades, master of none
Microsoft's most recent ad, titled "Power," emphasizes the Surface Pro 3's unique capabilities. Unlike Apple's Macbook Air, Microsoft's Surface Pro 3 includes a touch screen, a stylus, and a kickstand -- it is, as Microsoft repeatedly emphasizes, the "tablet that can replace your laptop."

Although the Surface Pro 3 is a dramatic improvement over its predecessors, major reviews have found fault with the device, particularly in the context in which Microsoft has chosen to present it. Compared to other laptop/tablet hybrid, the Surface Pro 3 is unmatched, but when compared to Apple's Macbook Air, it comes up lacking.

Re/code's Katherine Boehret, in particular, took issue with the comparison, declaring bluntly that the Surface Pro 3 didn't stand up to the Macbook Air. As a tablet, the Surface Pro 3's size is a hinderance -- and as a laptop, it's makeshift keyboard is a severe limitation.

Microsoft's money-losing Surface
From a business perspective, it's become difficult to tell what Microsoft hopes to accomplish with the Surface -- it hasn't made the company money, and seems only to have weakened the Windows ecosystem.

Microsoft may wish to brand the Surface Pro 3 an alternative to Apple's Macbook Air, but in reality, it could be far more threatening to other Windows-powered Ulrabooks. Responding to Microsoft's recent shift into hardware, Hewlett-Packard's CEO branded Microsoft an outright competitor; Acer has made similar remarks in the past.

At its best, the Surface Pro 3 appears to perfectly embody the spirit of Windows 8 -- one device for an operating system that can do just about anything. But if recent reports prove true, Microsoft may be moving away from such a strategy: Windows 9, due out next year, is rumored to reverse many of the changes Microsoft made to Windows, including bringing back the start button, doing away with the charms bar, and removing the Metro interface from Windows-powered desktops.

It's difficult to tell exactly how much Microsoft has lost on its Surface venture, but ComputerWorld recently estimated that it may be as much as $1.7 billion. To be fair, that's not much to a company with $85 billion in the bank, but it's certainly not a positive.

Mac market share is steadily increasing
"Our confused," Apple's CEO Tim Cook said last year in an obvious reference to Microsoft's Surface. "They're trying to make PCs into tablets and tablets into PCs."

As Microsoft struggles to find a market for its Surface, Apple's Macbooks have only become more popular. Mac market share has steadily risen over the last decade, and its growth in the U.S. has picked up in recent quarters.

Apple's Macs now consistently account for more than 10% of the U.S. PC market, and at times has defied the general slump in PC sales -- last holiday quarter, for example, Apple's Macs outpaced the larger PC market by around 36 percentage points, according to research firm Gartner.

The Macbook Air, in particular, appears to have been instrumental in the Mac's recent resurgence. Apple's share of the U.S. PC market broke above 10% for the first time in recent history in the third quarter of 2010, just a year and a half after the first-generation Macbook Air debuted. More recently, research firm NPD reported that the Macbook Air accounted for 56% of the Ultrabooks sold in the U.S. during the first five months of 2013.

Unfortunately for Microsoft, the Surface Pro 3 does not appear to be the device to reverse that trend. Perhaps consumers will be swayed by this recent advertising blitz, but if history is any guide -- Microsoft allegedly spent more than $1 billion advertising Windows 8 and the original Surface in 2012 -- that seems unlikely.

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Sam Mattera 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.

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.

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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."

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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.")

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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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