While management did not provide specific unit sales results for Microsoft's (MSFT 0.60%) cutting-edge Surface Pro 3 pseudo-tablet for the last quarter, we do know it "drove Surface revenue" to $908 million, more than double last year's result. As alluded to in a recent article, with Black Friday imminent, Microsoft could get its holiday season started with a bang thanks to its new hybrid form factor.
Still, you don't have to go far to find Surface Pro 3 naysayers. iFans are quick to point out that Apple (AAPL 0.01%) moved over 12 million iPads last quarter, good for nearly 23% of the tablet market, and Samsung (NASDAQOTH: SSNLF) wasn't far behind with 9.9 million units sold. But those heady tablet sales numbers should not dissuade Microsoft aficionados, because the "tablet that can replace your laptop" is a market unto itself. Don't believe it? Perhaps Time Warner's industry-standard publication will convince you.
You want innovation?
Time magazine annually issues its list of the 25 Best Inventions of the year. Included in the magazine's list are a bevy of cutting-edge, sometimes over-the-top, innovations that "make the world better, and smarter." Time's 2014 list, for example, includes a functioning, Back to the Future-like hoverboard, a high beta fusion reactor, 3D printing, and even edible food wrappers.
As you might have guessed, also included in Time's list of 2014's top 25 inventions is Microsoft's Surface Pro 3. The "svelte" tablet with the power of a laptop, as Time describes it, "makes it more suitable than other tablets for professionals like doctors and businesspeople." There's no doubt Surface Pro 3 makes sense in the workplace, and Microsoft already boasts several Surface enterprise customers.. But you can bet the company hopes Pro 3 makes its way into consumers' homes this holiday season, too.
If imitation is the sincerest form of flattery, Hewlett-Packard's Pro Tablet and Apple's rumored iPad Pro, among others, must have CEO Satya Nadella blushing. As is the case when initiating any new market, it's going to take some time before the Surface Pro 3 really impacts Microsoft's bottom line. But as Time and Microsoft's competitors recognize, Surface Pro 3 broke the tablet mold, and is already a game changer for Microsoft's mobile ambitions.
How successful is the Surface Pro 3?
Microsoft aims to sell millions of Surface Pro 3 hybrids, as well it should. The device is not in that Apple-like ballpark just yet, but early indications are promising. From the onset, despite the aforementioned negativity, one of Microsoft's biggest problems was ensuring supply met demand.
After introducing the devicein only three markets in May of this year, Microsoft opened the floodgates shortly thereafter when it released Surface Pro 3 around the globe. In Australia, some retailers were sold out by lunchtime of day one, and similar "problems" occurred in China and other markets. As a Microsoft Surface Pro exec said, "Given the interest that we saw as part of our U.S. 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."
Time got it right in choosing the Surface Pro 3 as a top 25 invention of 2014. While so many mobile manufacturers seem content in "introducing" an updated version of an existing unit -- a la the latest iPad -- Microsoft carved out a mobile niche for itself by developing an entirely new form factor. Add low-end smartphones in the fast-growing emerging markets of the world to Surface Pro 3's success, and the mobile leg of Nadella's two-pillared "mobile-first, cloud-first" strategy is starting to take shape.
If a boost in Microsoft's mobile business in general, and Surface Pro 3 in particular, aren't enough to get investors excited, the fact that the company is trading at about 18 times trailing earnings, well below the industry average of 24.69, should. That's even more impressive when you consider its stellar stock price run year to date.
Inclusion in Time magazine's list of top inventions doesn't guarantee continued sales momentum for the Surface Pro 3 by any means; that rests in the hands of consumers and businesses. But it confirms that Microsoft is back in the innovation driver's seat, for the first time in a long while.
