Black Friday's craziness isn't for everyone, even if it seems that way. But despite crowds fighting for the last electronic device on the shelf, working off the previous day's turkey feast via a day-long shopping excursion is a must for millions of Americans, and this year will be no different. Add in online deals to boot, and device manufacturers, including Microsoft (NASDAQ:MSFT), will have a lot to be thankful for this holiday season.
Though specific sales figures haven't been released, by most accounts Microsoft's newest entrée to the tablet market, the pseudo-device Surface Pro 3, has been a solid, if not spectacular, success. Though sales are steadily declining, Apple's (NASDAQ:AAPL) iPad still rules the tablet roost -- but Microsoft CEO Satya Nadella recognizes the race to the top of the device sales heap is a marathon, not a sprint. Microsoft has a legitimate shot at taking a giant step forward in the first of Nadella's two "mobile-first, cloud-first" pillars, and its Surface Pro 3 is why.
So far, so good
Despite initially introducing Surface Pro 3 to only three countries -- the US, Canada, and Japan -- and some reports to the contrary, it didn't take long before it was apparent that Microsoft's tablet was a success. Shortly after opening the doors to the rest of the globe, Microsoft quickly realized its mistake: it hadn't shipped enough of the devices to meet early demand.
As a Microsoft product head put it, "Given the interest that we saw as part of our US launch, retailers ordered what we thought was a healthy amount of Surface Pro 3s for these new markets. It turns out that we didn't ship enough." Nice problem to have, and one that was quickly remedied, as evidenced by Microsoft's most recent quarter. Among the many upsides of Microsoft's recently completed fiscal 2015's Q1 was news that, driven by "Surface Pro 3 momentum," revenues for the unit more than doubled from the prior year to $908 million.
As iFans are quick to point out, Surface Pro 3 sales are not in the same ballpark as those of Apple's iPad, which totaled 12.3 million units sold last quarter. However, that was the third straight quarterly decline in iPad sales for Apple, in part because the tablet market as a whole is losing steam. And that's where the Surface Pro 3 enters the picture.
In it to win it
There were some questions recently as to just how committed Nadella was to hardware in general, and the Surface Pro 3 in particular. Those rumors were put to rest when Nadella made it clear that he and Microsoft were backing the Surface product line-up 100%. Good thing, too, because Surface Pro 3 in many respects is in a market of its own creation, and as sales continue to gain momentum heading into Black Friday, Microsoft's Surface revenues this quarter could be extraordinarily positive.
Rather than build another iteration of the same tablet -- a la Apple and most other tablet manufacturers -- Microsoft put its innovation cap on and released Surface Pro 3. It's marketed as the tablet that can replace your laptop, which immediately differentiates it from the rest of the pack. How different? Apple seems to think there's something to this new form factor. If the rumors are true, Apple is working on its own pseudo-tablet, called, coincidentally enough, the iPad Pro.
It was the Surface Pro 3 that pushed Microsoft over the top last quarter, finally showing a profit from its Surface line. Microsoft CFO Amy Hood wasn't kind enough to share specifics, but after losing a reported $1.7 billion since its Surface products launched in 2012, turning the division profitable is a significant milestone, and its innovative new product did the trick.
If there's a knock on the Surface Pro 3, it's the price. Sure, that's at least part of the reason it was profitable last quarter, but the 64GB version at Microsoft's store will set you back $799, plus a list of accessories that will add to the cost. That's in the upper echelon of tablets and laptops.
But with Black Friday around the corner, retailers are already touting their respective deals, including as much as $150 off a Surface Pro 3. And as the shopping season draws near, don't be surprised to see more retailers enter the discount picture. With screaming good deals on the way, Microsoft's mobile unit, thanks to its Surface Pro 3, will bask in the holiday glow this year.
Tim Brugger 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.