Can Microsoft Corporation's Surface Pro 4 Challenge Apple's New MacBook?

Microsoft (MSFT -1.84%) is expected to launch the new Surface later this year to complement the arrival of Windows 10. The Surface Pro 4 might come in 12" and 14" versions, according to a recent PC Pro report, while IT Pro believes that an 8" Surface Mini is also in the works.

Many tech blogs like comparing the Surface Pro to Apple's (AAPL -0.57%) iPad, but that's an asymmetrical comparison. The recently discontinued Surface 2, which ran Windows RT, was intended to compete against iPads and other tablets. Meanwhile, the Surface Pro runs Windows 8, and is designed to compete against the MacBook Air as a lightweight productivity device.

The new MacBook. Source: Apple.

The Surface Pro 3 sold much better than its predecessors, boosting Surface revenues 24% sequentially to $1.1 billion last quarter. Will that momentum benefit the Surface Pro 4, and should Apple investors be worried?

The business of "ultramobile premium" devices
Gartner expects shipments of "traditional" PCs (laptops and desktops) to slip 7% annually this year to 259 million units. However, shipments of "ultramobile premium" devices -- like the Surface Pro and MacBook Air -- are expected to soar 59% to 62 million units. Tablet sales are only expected to rise 8% to 233 million units.

The disparity between those three markets can be attributed to an upgrade cycle which cuts tablets out of the loop. Slimmer 2-in-1 devices like the Surface Pro "bridge the gap" by packaging backwards software compatibility with the mobility of tablets. That combination is a lucrative one for businesses which are still dependent on older Windows-based systems.

The Surface Pro 3. Source: Microsoft.

The MacBook Air also fits well in most enterprise settings, thanks to Office 365 compatibility, the ability to run Windows with Boot Camp, and widespread BYOD (bring your own device) clearance.

Meet the new MacBook
Apple recently unveiled its new 12" MacBook, which is 24% thinner and consumes 30% less power than the 11" MacBook Air. It has a completely fanless design, thanks to Intel's (INTC -1.79%) Core M chipset, and sports a single USB-C port which can be used for power, USB data transfer, DisplayPort, HDMI, and VGA capabilities.

By comparison, the Surface Pro 3 runs on Intel's older Haswell chips, which still require fans. It also has a full-size USB 3.0 port and Mini DisplayPort. But when we compare the specs of a comparably priced mid-tier Surface Pro 3 -- which both cost $1299 -- neither ultramobile device emerges as a clear victor.

Source: Company websites.

However, the close prices and specs of the new MacBook and older Surface Pro 3 leave Apple vulnerable to being upstaged by the Surface Pro 4. If Microsoft packs beefier hardware into the Surface Pro 4 and uses it to showcase Windows 10, it could steal the ultramobile spotlight from Apple.

Apple is getting defensive
Apple might not admit it, but its long-rumored 12.9" iPad Pro (which might come with a stylus) is a reactionary move against the Surface and other Windows hybrid devices. Apple's iPad sales fell 22% year-over-year last quarter, but still accounted for 12% of its revenue. By comparison, Mac sales rose 9% and accounted for 9% of Apple's top line. If this trend continues, Mac sales could soon eclipse iPad sales.

Meanwhile, the iPhone 6 Plus is cannibalizing the iPad Mini as Surface sales are rising. Therefore, it makes sense for Apple to increase iPad sizes and rebrand them as productivity devices like the Surface.

Why the MacBook matters
Most Apple investors only focus on iPhone sales, which generated 69% of its sales last quarter. However, Apple's growing presence in the PC market shouldn't be ignored. According to IDC, Apple's global market share in PCs rose from 5.8% to 7.1% between the fourth quarters of 2013 and 2014. Apple also controls 12.2% of the U.S. PC market, ranking third behind Hewlett-Packard and Dell.

This is a valuable market Apple should nurture, since it will be a valuable safety net if iPhone sales dip. Microsoft's Surface Pro 3 represents a technological turning point for the PC market, which could possibly curb that growth with fresher form factors. Therefore, Apple investors should keep an eye on Microsoft's plans for the Surface Pro 4 and Windows 10, and whether or not they could impact MacBook sales.