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Why Microsoft's Surface Pro 3 Sales Soared as Apple's iPad Sales Plunged
Motley Fool ^ | 12/11/2014 | Leo Sun

Posted on 12/11/2014 9:23:14 AM PST by SeekAndFind

Apple (NASDAQ: AAPL  ) reported its fourth-quarter earnings on Oct. 20, impressing investors in all areas except for iPad sales. iPad shipments fell year over year for the third consecutive quarter, dropping 13% to 12.3 million units. iPad revenue ($5.3 billion) also came in lower than Mac revenue ($6.6 billion) for the first time in years.

Three days later, Microsoft (NASDAQ: MSFT  ) posted its first-quarter earnings, revealing that sales of its Surface tablets had more than doubled both year over year and sequentially, to $908 million. Microsoft attributed that surge in demand to "strong interest from students, professionals, and increasingly enterprises for Surface Pro 3."

Apple's iPad Air 2 (L) and Microsoft's Surface Pro 3 (R). Source: Company websites.

The decline of the iPad and the sudden rise of the Surface highlights an interesting divergence between the tablets and "laplets" markets. Let's look at what this market shift could mean for both companies in the long run.

Why the iPad is falling
Demand for the iPad is waning for three main reasons: a longer upgrade cycle, a lack of compelling new features, and its premium price tag.

iPhone sales are fairly predictable, thanks to two-year carrier contracts that end with an inevitable upgrade. The iPad, on the other hand, is upgraded in a manner similar to PCs, meaning it is only upgraded upon becoming outdated. Moreover, many customers are handing down their old iPads to family and friends before upgrading, which throttles sales of iPads to new customers.

On Oct. 16, Apple unveiled the new iPad Air 2 and iPad mini 3. While the iPad Air 2 was slimmer, lighter, and had better specs than its predecessor, the mini 3 has the same specs as its predecessor, with bigger storage options (up to 128GB) and a Touch ID sensor. This refresh, while expected, simply won't convince customers to ditch their old iPads. Moreover, the iPhone 6 Plus will probably cannibalize sales of the iPad mini 3.

That brings us to the third issue: the iPad's questionable ability to maintain its pricing power. Lenovo (NASDAQOTH: LNVGY  ) , for example, recently unveiled the Yoga Tablet 2 Pro, an impressive 13.3-inch Android tablet with a built-in Pico projector, a subwoofer, and a 32GB hard drive, starting at $500. That's the same price as an entry-level iPad Air 2, which has a 9.7-inch screen and 16GB of storage. Granted, these two devices appeal to different types of customers, but it's not hard to see how the owner of an older iPad could be tempted by the Yoga Tablet 2 Pro. Meanwhile, low-end Android tablets are now so cheap that it's possible to buy two or three for the price of one new iPad.

Lenovo's . Source: Lenovo.

These three problems have caused the iPad's global market share to fall from 60% in the second quarter of 2012 to 27% in the second quarter of 2014, according to IDC.

Why the Surface is rising
Microsoft's Surface had a rough start when it hit the market in October 2012, but customers eventually realized the device was more of an ultrabook than a tablet. Microsoft also heavily marketed the Surface as a productivity device for students and professionals, rather than going head-to-head against the iPad as a consumer tablet.

Microsoft leveraged Windows' dominant market share of PCs to give businesses a smoother way to upgrade their older computers without abandoning legacy software or older network setups. With the docking station ($200), the Surface can be converted to a full desktop with a wired ethernet connection -- which can't be accomplished by first-party means on an iPad.

In September 2013, Delta Air Lines (NYSE: DAL  ) announced that it would equip 11,000 pilots with Surface tablets installed with paperless "electronic flight bags" with key charts, reference documents, and checklists. Hospitals, including Seattle Children's Hospital and the University of Pittsburgh Medical Center, have also deployed the Surface Pro 3 to help doctors seamlessly access electronic health records from the patient's bedside and their desks. Some retail stores have even installed the Surface in customer-facing kiosks that link to their sales database.

More importantly, the arrival of the Surface has convinced Microsoft's hardware allies (and competitors) to develop similar convertible devices targeting both regular and enterprise consumers. This helps Microsoft generate more revenue from industrywide Windows OEM licenses, which are far more important to its top line than Surface sales.

The tortoise and the hare
While many consumers like to compare the iPad and the Surface, investors should remember that the two devices are designed with two very different strategies in mind.

The iPad is focused on leapfrogging over legacy PCs and into the future. That's why it eschews the microSD card readers and USB ports that can be found on the Surface. The Surface is developed as a more practical transition between PCs and tablets, since it can fully replace traditional desktops and laptops without forcing businesses to sacrifice legacy software and hardware.

Therefore, Apple might have jumped too far ahead when it launched the iPad four years ago, which has now caused it to burn out and lose momentum. Meanwhile, Microsoft built the Surface with enterprise needs in mind, which is now helping it slowly, but steadily, gain market share.

Forget the iPad, next hit Apple product revealed
Apple recently revealed the product of its secret-development "dream team" -- Apple Watch. The secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors.


TOPICS: Business/Economy; Computers/Internet
KEYWORDS: apple; ipad; microsoft; surfacepro; tablets
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To: longtermmemmory

RE: cloud BS

Well, so is Microsoft’s Office 365.


41 posted on 12/11/2014 12:03:45 PM PST by SeekAndFind (If at first you don't succeed, put it out for beta test.)
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To: SeekAndFind; ~Kim4VRWC's~; 1234; Abundy; Action-America; acoulterfan; AFreeBird; Airwinger; ...
A FUD article claiming that iPad sales are "plunging" while "Microsoft Surface sales Soared" all based on data from IDC. . . which is bogus. In the last 12 months, Apple sold 68 million iPads, with a slight slowing of pace while people were waiting to see what the Phablet iPhone 6/Plus would be like. Microsoft has perhaps sold 1.5 million MS Surface Pro 3s.

It is also the two week pre-Christmas anti-Apple product FUD season. Get out the PopCorn. For those of us on low-carb diets, we can string it into nice decorative garlands! — PING!


Apple FUD Ping!

If you want on or off the Mac Ping List, Freepmail me.

42 posted on 12/11/2014 12:26:13 PM PST by Swordmaker (This tag line is a Microsoft insult free zone... but if the insults to Mac users contnue...)
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To: SeekAndFind
The latest one for Christmas is just as annoying with several people singing (badly) WINTER WONDERLAND ( with different words extolling the virtues of the Surface Pro ).

I saw that one for the first time last night. . . and as a singer cringed. It made me wonder if the expertise of the singers transferred to the expertise of the makers of the product. . . then I looked up and saw the product. The MS Surface is not a bad product, but it's just a product that basically really requires, well, a surface to really properly be used. It's true competitive product is the Macbook line, not the iPad. . . and while there are keyboards for the iPads, most people who buy them (myself among them) soon find them selves just not using them.

43 posted on 12/11/2014 12:32:06 PM PST by Swordmaker (This tag line is a Microsoft insult free zone... but if the insults to Mac users contnue...)
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To: Smedley
Apple has its head up its collective arse. The shortcomings of the iPad are evident. Wouldn’t be hard at all to have a full-fledged word editor and other features commonly found on laptops. It would not have hurt them to add removable/upgradable memory either.

Uh, Pages, Microsoft Office both free for the iPad. . . you obviously have no knowledge of what's available for the iPad.

44 posted on 12/11/2014 12:37:39 PM PST by Swordmaker (This tag line is a Microsoft insult free zone... but if the insults to Mac users contnue...)
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To: Catphish
Surface Pro 3 is great!

Too expensive for me but if I were offered a free iPad or free Surface Pro I would take the latter. Every time! S Pro3 is vastly superior to the iPad

45 posted on 12/11/2014 12:40:53 PM PST by dennisw (The first principle is to find out who you are then you can achieve anything -- Buddhist monk)
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To: SeekAndFind

I agree its too expensive. What’s exciting is that it is finally a usable product. I’m waiting for the newer models to come out. Like everything else, the price will come down as they cream the market.


46 posted on 12/11/2014 12:43:47 PM PST by RinaseaofDs
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To: VanDeKoik
Apple themselves had said they think the idea of a touch OS hybrid like Windows was a stupid idea.

Let's see. . . 68 million (per Apple Financial Statements) iPads sold up to October. 1,135,000 ($908 million [per article] divided by $800 selling price on MS online store) Surface Pro 3 sold up to October. RIGHT! 1.7% of Apple's iPad sales. You keep being delusional, VanDeKoik.

47 posted on 12/11/2014 12:49:09 PM PST by Swordmaker (This tag line is a Microsoft insult free zone... but if the insults to Mac users contnue...)
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To: Yo-Yo; dfwgator
Did Apple learn nothing from Windows 8?

There is no need to learn anything. Apple is not trying to merge iOS and OS X. Yosemite is more OS X and less iOS than before. . . Apple understands the roles of each device quite well. Listen to Steve Jobs Post PC Era speech.

48 posted on 12/11/2014 12:52:43 PM PST by Swordmaker (This tag line is a Microsoft insult free zone... but if the insults to Mac users contnue...)
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To: Ted Grant
Apple has a very dedicated following, but it isn’t growing very much. I believe that the Surface is doing very well but I have yet to meet someone who actually owns one.

Right . . it's only grown to encompass 1 billion iOS devices. . .

49 posted on 12/11/2014 12:58:04 PM PST by Swordmaker (This tag line is a Microsoft insult free zone... but if the insults to Mac users contnue...)
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To: Swordmaker

It won’t get to two billion.


50 posted on 12/11/2014 1:12:49 PM PST by Ted Grant
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To: Dr. Sivana
It looks like Microsoft actually is making money off of it already, which beats the first few years of its Xbox offerings. Nonetheless, there is no cause/effect relationship between Microsoft's promising but non-disruptive entry. Apple's % decline in the pad segment is due to saturation and the slew of Android based options, with Samsung alone dwarfing Microsoft's presence.

Actually, the stats show that the decline is across the board in the Tablet market with the Android segment much farther down than the iPad segment. Samsung has hit a 30-40% decline. So far this Christmas season, sales of iPad seem to be roaring.

Part of this decline in Tablets is the effect of large inventories of unsold white box Android junk in inventory which was shipped in previous quarters being now being deeply discounted which is now competing against orders for new white box Android junk tablets from being shipped which means they remain in manufacturers' warehouses. Can we say they are overstocked? We may start seeing some of these in cereal boxes as free give-aways. . . just to get rid of them! LOL!

On the other hand, when these Junk Android tablets were being heavily discounted for Black Friday and Cyber Monday, several Computer Security companies analyzed them and found that almost ALL of them were shipping pre-rooted and many already had malware already installed capable of stealing IDs, remote exploits, and some even had key-loggers installed! Some of these were being sold with what consumers would assume were "trusted" names such as "Pioneer" and "Bell and Howell," etc, but they were still basically no-name white box Android tablets, often running antique Android as old as 2.1 with no way to update.

Apple is selling what they have manufactured—their just in-time systems try to maintain a three to four week supply—but the sheer numbers of cheap under $50 crap out there makes it look as if they have lost market share to Android—tablets that really have little capability that are really not anywhere near the same league as an iPad or a Samsung Galaxy Tab, mere Toys.

51 posted on 12/11/2014 1:24:54 PM PST by Swordmaker (This tag line is a Microsoft insult free zone... but if the insults to Mac users contnue...)
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To: Swordmaker

odd many people consider an ipad the same as any other tablet.

(ipad is a tablet but not all tablets are an ipad)


52 posted on 12/11/2014 1:27:58 PM PST by longtermmemmory (VOTE! http://www.senate.gov and http://www.house.gov)
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To: Smedley
Let Apple learn, or perish

They died years ago when Michael Dell said Apple should sell the stock and return money to stockholders, oh wait Michael sold his company to himself instead.

53 posted on 12/11/2014 1:30:00 PM PST by itsahoot (Voting for a Progressive RINO is the same as voting for any other Tyrant.)
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To: Ted Grant
It won’t get to two billion.

Apple has reached one billion iOS devices in seven years. . . and the growth, contrary to your original claim is accelerating. They are just entering China and now India. Why do you think, if your original post was wrong, this claim is not wrong as well?

54 posted on 12/11/2014 1:30:24 PM PST by Swordmaker (This tag line is a Microsoft insult free zone... but if the insults to Mac users contnue...)
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To: VanDeKoik
Apple’s fans ran around for months mocking the Surface for every reason under the sun.

Maybe you should go back and review the threads when Apple announced the iPad, you guys had a lot of fun with that one as I recall.

55 posted on 12/11/2014 1:32:28 PM PST by itsahoot (Voting for a Progressive RINO is the same as voting for any other Tyrant.)
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To: Jonty30
I don’t personally get the attraction of a watch

Wait until you have been retire a few years, you won't even need a calendar.

56 posted on 12/11/2014 1:34:35 PM PST by itsahoot (Voting for a Progressive RINO is the same as voting for any other Tyrant.)
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To: Swordmaker

And your bizarre need to regurgitate Apple sales numbers had what to do with what I said?

I know you guys love to live through them like you actually made the money yourselves, but seriously learn to follow a conversation before you break out the ledgers.


57 posted on 12/11/2014 1:35:44 PM PST by VanDeKoik
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To: longtermmemmory
odd many people consider an ipad the same as any other tablet.

Some products become so iconic they enter the lexicon of the language. . . and the product name becomes the category. Kleenex tissue comes to mind as people started saying pass the kleenex as well as Scotch tape. . .Even Google's trade mark is quickly becoming a verb, "Would you google that for me?" or "I googled it and here is what I learned about TseTse flies." It won't be long before it's gone lexiconic. In fact, i would not be surprised if it hasn't already been added to the OED.

Owners of Trademarks have to defend militantly against such usages or their Trademarks become mere words. . . and as such they lose them into the lexicon and any competitor can use them. Then it would be perfectly legal for Samsung to sell the Samsung iPad. . . Not Good.

58 posted on 12/11/2014 1:41:43 PM PST by Swordmaker (This tag line is a Microsoft insult free zone... but if the insults to Mac users contnue...)
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To: Swordmaker
A FUD article claiming that iPad sales are "plunging" while "Microsoft Surface sales Soared" all based on data from IDC. . . which is bogus.

OMG Someone had the raw nerve to say something good about a non Apple device at the expense of Apple. These %$#@%$^@# SOBs are full of @#!$%@!#%%@#$. Quick, run in and start screaming about sales figures and toss at fit with me!!!

PING! PING! PING! PING! PING! PING! PING! PING! PING! PING! PING! PING! PING! PING! PING!



Apple fanboy propaganda squad powers ACTIVATE!!!

Set shill level to 100000!
59 posted on 12/11/2014 1:45:42 PM PST by VanDeKoik
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To: itsahoot
Wait until you have been retire a few years, you won't even need a calendar.

I bought my Mom a wall clock that just shows what day of the week it is . . .

she thought it the most useful clock she ever owned!

60 posted on 12/11/2014 1:46:42 PM PST by Swordmaker (This tag line is a Microsoft insult free zone... but if the insults to Mac users contnue...)
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