It's safe to say Microsoft (NASDAQ:MSFT) CEO Satya Nadella's "mobile-first" plans have been refined -- to put it mildly -- following the decision to acquire Nokia's flailing phone business for $7.2 billion over two years ago. Sales of smartphones, long the bailiwick of industry stalwarts Apple (NASDAQ:AAPL) and Samsung (NASDAQOTH:SSNLF), weren't the answer to Microsoft's mobile ambitions.
"Mobile first" is about getting the new Windows 10 OS into as many devices as possible -- mobile and PC -- along with making Microsoft's software product suite compatible with Apple's iOS, and Samsung's OS of choice, Android. The mobile plan is paying off handsomely, too, as indicated by Microsoft's strong Office 365, Dynamics CRM, and Bing search revenue improvements.
But hardware hasn't been left out of Microsoft's mobile plans entirely -- its Surface Pro line-up is a testament to that -- and folks like Apple and Samsung may benefit by what is expected to be a fast-growing market thanks, in large part, to Microsoft.
Just the facts
It's no secret that the market for PCs has been declining for some time, and it's not likely that trend will change any time soon. Sales of tablets are also expected to continue dropping, by as much as 8.1% this year compared to 2014, according to recent estimates from research company IDC. But the non-smartphone device market has an upside amid the doom and gloom: detachables.
Even as PCs, smaller screen devices like phablets, and mini-tablets are all expected to lose market share in the coming years, mid-sized detachable device sales are expected to skyrocket in 2016, by more than 75%. As per IDC, mid-sized pseudo-tablets -- a category including the Surface Pro and Apple's new iPad Pro -- will make up the largest piece of the market by 2019. What's driving that expected sales growth?
IDC mentions Apple's iPad Pro as one reason for such high hopes for the detachable market, although to date, reviews and estimated sales leave much to be desired. Microsoft's Surface Pro lineup, however, is experiencing no such problems. In fact, IDC expects Microsoft's Windows detachable market share will more than double by 2019. And based on new, estimated sale data, IDC's expectations for Microsoft's detachable hardware devices growth may prove conservative.
Off and running
It's difficult to determine Surface Pro sales specifics given Microsoft's decision in Sept. to change its financial reporting, but it appears the "tablet that can replace your laptop" played a key role in limiting the "more personal computing" division's decline in revenue to just 16%. Microsoft's phone revenue, another component of the unit, dropped a whopping 54% in fiscal 2016's Q1. How, then, was Microsoft able to ease the unit's pain, despite the precipitous decline in phone revenue?
According to Oct. sales estimates for Microsoft's Surface Pro and Apple's iPad Pro, all of the positive feedback that's been bandied about from industry pundits and consumers since Surface Pro first hit the streets is more than idle chatter. In October, Microsoft's Surface Pro accounted for an estimated 45% of online sales, handily beating Apple's iPad Pro sales of just 17%.
One month is hardly a representative data sample, but it does reinforce the sense that Surface Pro has quickly become a force to be reckoned with. And as Samsung's smartphone sales can attest following on the heels of Apple's game-changing iPhones, being first to market with a new form factor opens the door to any number of new players. Just as Microsoft's Surface Pro, Pro 3, and now the Pro 4, could do for Apple's foray into the detachable market.
With each new Surface iteration, Microsoft is not only boosting its own mobile-first initiatives, it's making a lot of noise that's helping to drive one of the fastest-growing device markets on the planet. With that said, as we head into the year of the detachables, a quick note from Microsoft fans to Apple's iFaithful is in order: You're welcome.
Tim Brugger has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Apple. 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.