There were a number of major announcements when Microsoft (NASDAQ:MSFT) hosted its much-ballyhooed product unveiling event in New York City on Oct. 6. A new and improved fitness band, an updated augmented reality HoloLens, Lumia phablets, and a new Surface Pro 4 pseudo-hybrid tablet complete with a snazzy new pen were all featured introductions during Microsoft's big day.
But it was Microsoft's first foray into laptops -- the new 13.3 inch Surface Book -- that stole the show. Just as the Surface Pro 3 is able to provide users with both a tablet and laptop experience, the Surface Book aims to knock Apple's (NASDAQ:AAPL) MacBook Pro off the shelves by offering the reverse -- a laptop with tablet-like features.
At an introductory price of $1,499, the Surface Book is hardly cheap, but that hasn't prevented early adopters from jumping onboard. In fact, Microsoft's online store has already sold out of its Surface Book stock, which translates to its being an unmitigated success, right? Not necessarily.
Old game, new name
To say that there was a lot of fanfare surrounding the introduction of Apple's new Watch would be a huge understatement. The Watch was going to set the wearables market on its head when it was introduced in early April of this year. And based on its early "success," Apple clearly had a hit on its hands.
After all, the new Watch sold out within a week -- sort of like the Surface Book -- proving that demand outstripped supply. Of course it was, "unknown how many devices the company [Apple] made available for pre-orders." Based on the latest projections -- conveniently, Apple has been remiss in sharing unit sales specifics -- Watch sales nose-dived soon after the introductory "noise" died down.
Similarly, Microsoft's new Surface Book selling out so quickly during its pre-order stage means little to nothing. Without a clear indication of how many Book units were initially available, Microsoft sharing that its inventory of Books "sold out" comes across as a marketing ploy, which is what it is.
That said, as Microsoft demonstrated last quarter, and is likely to do so again when it announces fiscal year 2016 Q1 earnings on Oct. 22, the Surface line-up has quickly become an unmitigated success. And there's no reason to think its new laptop won't enjoy the same sales results.
What really matters
Last quarter's 117% improvement in Surface sales to nearly $900 million in revenue was impressive in and of itself. But what made the Surface division's results really spectacular was that it was accomplished with a mere 150 or so resellers. Now, with over 4,500 resellers slated to hit the pavement selling the Surface line-up, presumably adding Microsoft's Surface Book into the mix, sales should skyrocket in the quarters ahead.
To be sure, Microsoft has a ways to go to catch Apple's nearly 4.8 million Macs sold last quarter, and its $6 billion in revenue. Microsoft's $1 billion plus Surface sales it will probably generate this quarter pales in comparison to Apple's Mac revenue, but with the new Surface Book and thousands more sales folks hitting the streets, investors can expect that disparity to lessen before long.
The early reviews of Microsoft's Surface Book have been extremely positive, by and large. Unfortunately, news of its selling out is also being hailed as an indication of the Book's unbridled success. Don't read too much into that, however. Just as with the introduction of Apple's Watch, early adoption is not necessarily an indication of long-term success.
When Microsoft announces its current quarter results, cloud-related sales will still be first and foremost: just as they should be in CEO Satya Nadella's "mobile-first, cloud-first" world. As for its new Surface Book, it's too soon to make a financial impact this quarter, but it will be interesting to see how Microsoft's Surface division performs in fiscal Q2. Don't expect too much based on the Surface Book "selling out" so quickly -- that could be nothing more than marketing-speak.