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Can Microsoft Corporation Sell Business Owners On Surface Pro 3?

By Daniel B. Kline – Oct 14, 2014 at 6:00AM

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The company is banking on its traditional user base to support its struggling product line.

Microsoft (MSFT 1.05%) has struggled to find an audience for its Surface line.

The original model of the tablet/laptop hybrid -- the one running Windows RT, the stripped down version of its Windows OS -- was meant to compete with Apple's (AAPL 0.83%) iPad. That was not successful partly because Microsoft was very late to the party and partially because tablets running Google's (GOOG -0.19%) (GOOGL -0.15%) Android OS had already become established as iPad alternatives.

Now, however, the lower-end RT Surface has seemingly faded in importance for Microsoft and the company has shifted its focus to the high-end Surface Pro 3. Specifically, Microsoft is pushing its hybrid device to two audiences -- business users and Apple MacBook Air customers.

Surface Pro 3 vs. MacBook Air
Surface Pro 3 actually compares well to Apple's signature laptop and Microsoft has spent big on ads to show customers how the two match up.

Source: YouTube

The pair have similar specs. Both are elegant machines, and the Surface has the advantage of being a tablet and a laptop.

The ability to go from tablet to laptop (which the MacBook Air obviously cannot do) was also promoted in an email Microsoft sent to its mailing list Friday. The message, which was reinforced with a photo, was very simple.

Can a MacBook Air instantly snap from a laptop to a tablet?

Didn't think so.

That's a cool feature, but nothing has shown that business users are eager for that functionality. Yes, in theory it's nice to not have to carry an iPad and a MacBook Air when traveling. But the slight added convenience of a removable keyboard may not be enough to convince Mac users to pick up a Surface.

And, it should be noted that the Surface's clip-on keyboard is really nice for what it is, it's not equal to a regular keyboard.

Microsoft has offered as much as $650 in credit toward a Surface Pro 3 for people who trade in a MacBook Air. That's a good gimmick, but it's hard to picture anyone trading in a fully functioning, paper thin laptop for a hybrid -- even a really good one.

Luring business customers
While trying to win over Mac users seems a lot like Metallica trying to recruit One Direction fans, Microsoft may have better luck with its core customer base of business users. Microsoft Office and Windows still dominate the desktop market with a 91.98% market share as of September, according to NetMarketShare.

IT departments at large companies also tend to be geared toward supporting Windows -- not Apple products -- which, in theory, means Surface should be appealing to that audience. The biggest problem Microsoft has may be convincing business users that if they invest in Surface Pro 3 it will be around for the long haul.

Because Surface has struggled, the product line has been the subject of much media speculation saying Microsoft may simply throw in the towel. That line of thinking makes some sense because when Surface was launched it was essentially the only Windows 8 tablet. Now a number of major players make tablets and hybrids running the OS.

The company took steps to show its long-term commitment to Surface Pro 3 in a lengthy blog post, which attempted to make the case for businesses to commit to the hybrid. Microsoft went as far as including the following quote from CEO Satya Nadela.

We believe a strength of the Microsoft platform for enterprise is the rich ecosystem of hardware and applications developed by our partners, the community at large, and some of our own teams at Microsoft. In particular with Microsoft Surface Pro 3 we are now offering an enterprise-class device that can deliver great end user productivity. Microsoft is putting its full and sustained support behind the ongoing Surface program as one of a number of great hardware choices for businesses large and small.

Short of making a blood oath or a pinkie swear, there is little else Microsoft can do to show customers it intends to support Surface Pro 3 for the long-term.

Will it work?
Surface Pro 3, which I have had a chance to play with, is very good tablet and a decent laptop. It's a nice device to use while traveling provided you only need to do limited amounts of typing. Its keyboard is better than any of the iPad add-on keyboards I have tried, but it's not comparable to even a mediocre laptop's.

The fact that Surface Pro 3 runs Windows, which most offices do, makes it appealing to business users, but IT departments have already been forced to support iPhones and iPads. It's hard to imagine that reason alone is making them purchase Surface Pro 3s. It's also impossible to see how Mac loyalists would trade in the MacBook Airs for a device that's almost as good as an iPad and not nearly as good as the Mac laptop.

That leaves a very narrow market of people for whom a hybrid and the convenience it offers holds major appeal. Microsoft has created a near-perfect device for business users who want a slim device that can function as a laptop or a tablet. That's not a big enough market to make Surface Pro 3 a success, but perhaps it's enough people to give Microsoft a toehold to build on.

Surface Pro 3 is the leader in a category -- hybrids for business use -- that barely exists. If Microsoft can grow that audience, perhaps it can find a way to improve its keyboard and make Surface Pro 3 an actual laptop replacement rather than a tablet with a good-for-what-it-is keyboard.

Daniel Kline owns shares of Apple and Microsoft. The Motley Fool recommends Apple, Google (A shares), and Google (C shares). The Motley Fool owns shares of Apple, Google (A shares), Google (C shares), and Microsoft. 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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