By most accounts, this will be the year that tablets make the long-expected jump to global acceptance. Tablets have hardly flown under the radar -- there were 47.6 million units shipped around the world in Q3 2013 -- but that's chickenfeed compared to what's expected this year.
According to a new report from Gartner, 263.45 million tablets will be shipped in 2014, a whopping 47% increase from last year's "paltry" 175.53 million. By 2015, according to Gartner, tablets will become the second most popular device sold, behind smartphones. That's a lot of opportunity, but also a tremendous challenge for Microsoft (NASDAQ:MSFT) as the new kid on the tablet block.
Playing with the big boys
It's no secret Microsoft was late to enter the mobile-device market, and outgoing CEO Steve Ballmer has made that abundantly clear. Acquiring the devices and services unit from Nokia is certainly a step in the right direction, particularly as Microsoft attempts to steal smartphone market share away from Apple (NASDAQ:AAPL) and Samsung (NASDAQOTH:SSNLF).
As for tablets, Microsoft finds itself fighting the same foes -- Apple and Samsung -- and, if anything, it's even more of an uphill climb. At least with smartphones, Microsoft is on the radar thanks to Nokia, clawing its way into a respectable third place. But in the latest tablet-sales figures, Microsoft is nowhere to be found -- yet.
Of the aforementioned 47.6 million tablets shipped in Q3 2013, Apple led the way with 14.1 million, followed by Samsung's 9.7 units. And Apple's new iPad Air should give tablets sales a boost in Q4. Both behemoths were well ahead of Asus, which was a distant third with 3.5 million tablets shipped. Microsoft? It was included in the "other" category at the bottom of the list.
All is not lost
Making a dent in the fast-growing tablet market is going to be a monumental task, to be sure. But Microsoft showed signs of life in its fiscal 2014 Q1 ending Oct. 24, 2013. Though not nearly in the same ballpark as Apple's or Samsung's tablet revenues, Microsoft announced it had generated $400 million in Surface sales in fiscal Q4.
While Microsoft didn't mention in its fiscal Q1 report how the $400 million in tablet revenues stacked up to the prior quarter -- a glaring omission -- it did fess up on the earnings call that it was double fiscal 2013's Q4 results. Surface Pro's annual run-rate of $1.6 billion, not counting an expected boost in tablet sales during the holiday-shopping season, is certainly a step in the right direction.
The release of its updated, and vastly improved, Surface Pro 2 and lower-end Surface 2 tablets gives Microsoft fans another reason for hope. The new tablet rollouts were announced about the same time Microsoft updated its Windows OS to version 8.1, another change that was viewed by many as a big improvement.
The new tablets, the new OS, and its recently completed strong quarter of tablet sales, should be more than enough to maintain Microsoft's positive momentum. And if Gartner is right, 2014 will be a pivotal year for mobile devices in general and tablets in particular.
Final Foolish thoughts
Apple and Samsung fans may pooh-pooh Microsoft's tablet ambitions, and right now they can get away with it: Microsoft is little more than a blip on the radar. Thing is, Microsoft's efforts to become a significant force in the tablet wars was never going to happen overnight; that's not the way it works when you join the battle after it has already begun. But long-term Fools shouldn't count Microsoft out: Now it's got the ammunition and the timing couldn't be better.
Fool contributor Tim Brugger has no position in any stocks mentioned. The Motley Fool recommends Apple and Gartner. 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.