Any person on this planet, who is a follower of Microsoft (MSFT, Financial) or an aficionado or for that purpose, an interested analyst, would know of the debacle that the company made with its Surface line of tablets. In June last year, the company had to write down a whopping $900 million on its “inventory” of Surface RT tablets and accessories. Different reasons were cited for the apparent lack of demand, including high pricing of the tablet, insufficient distribution networks, lack of apps in Windows store, and a miscalculation in supply numbers by the management. However, Microsoft’s latest product –Â the Surface Pro 3 –Â has been received well by the critics, and the company itself has highlighted the value it will add to businesses. As Microsoft’s Brian Hall puts it, “Most businesses are buying Surface when their employees need a laptop and want to avoid having to buy and carry an iPad too. Surface Pro 3 serves as a full-powered business PC and a tablet, making for happy employees as well as happy CIOs and CFOs. One device means less to buy, deploy, manage and secure.”
Windows 10 can be a winner
One of the other drivers that could power the future growth of the Surface range of tablets is the introduction of Windows 10, a powerful and feature-heavy OS from the company that has been designed to bring massive improvements over the 8.1 version. Windows 8 was criticized on different grounds including absence of start button and a mix and match of different UIs as the company tried to retain the original outlook and overlaid it with a “live tiles” interface. Probably, the philosophy that spearheaded the design efforts behind Windows 8 was the need to stay connected and provide one OS across a range of devices. However, the Redmond giant made a mistake by combining the PC and tablet experience, packing them in one OS and bombarding it on the users at one go. The result of this affair was a terrible 33% drop in revenue of Windows and Windows Live Division in the fall of 2012.
Last week or so, Microsoft provided us with a "technical preview" of Windows 10, highlighting more of the enterprise and more complex tasks that users use on their PCs. Most of the issues that Windows’ users had complained of in the earlier version have been adequately dealt with in Windows 10, which is slated to provide the users with a unified and beautiful OS experience. This article covers the nuances of Windows 10 quite extensively and also provides a wonderful insight into the salient improvements, which should initiate growth in Windows' division of the company. While the company took considerable time in introducing what seems to be the most significant big bang releases in the last decade, Microsoft also spared some time for this video, which highlights various features of Surface Pro 3.
More on Surface Pro 3
The company intelligently showcased how the Surface tablet could be entirely tuned to provide a tablet-style, touch-based experience, or a mouse-and-keyboard experience with the switch of a button. In fact, this is one of the reasons that big corporate houses are going for this product for their employees. Even retail consumers are now shunning their iPads and other tablet devices in favor of Surface Pro 3 as it provides an efficient mix of laptop and tablet experience. This is in sharp alignment with Microsoft’s outlook for Windows 10. The company said in its presentation that Windows 10 will be able to work seamlessly across across every device from a mobile phone to a desktop computer. This could be a huge change for Microsoft that will ultimately improve the experience across every device, such as Surface tablets.
I have talked quite a bit about the hardware and software aspects of the Surface Pro 3 tablet, which has been positioned as the perfect solution for businesses as well as retail consumers, for its convenience advantage and also compatibility of accessories with later generations of Surface. Yes, Microsoft has stated that hardware accessories like the Type keyboard cover, the Surface Pro 3 Docking Station and the power adapter, Ethernet adapter and other add-ons will continue to be compatible with the next generation of Surface hardware. That is a particularly relevant concern given the fact that Microsoft changed everything and rendered almost all of the Surface Pro 2 hardware accessories obsolete with the launch of the Surface Pro 3.
Intel’s M can be the next big thing
Lastly, let me take a few moments to analyse the latest innovation from Intel (INTC, Financial), which debuted the state-of-the-art 14nm core M processors, packed in compact reference tablet called Llama Mountain. These processors are ultra-efficient, passively cooled chips that will eventually power light-weight and fanless tablets. A benchmark study conducted by a tech analyst, revealed that this impressively thin tablet outperformed the i3 Surface Pro 3, and scored comparably to the i5 SP3 in CPU performance. In graphics, the Core M chip outperformed both of them. You can check the complete results on this link.
It is being contemplated that the Surface line of tablets will incorporate the core M processors, which would result in ultra-thin, light-weight and highly efficient tablet devices. Definitely, Microsoft will have be quite cautious in pricing the product and should aim at accommodating these processors in a price-effective manner.
Takeaway
Agreeably, Microsoft has come a long way in building capability for designing a stellar tablet. The CEO Satya Nadella’s vision of mobile-first cloud-first is already coming to life and with this philosophy, Microsoft’s enthusiasm in the smart devices segment can be easily gauged. The stock also has a favourable forward multiple of around 14.3 as compared to an industry average of 18.6, suggesting a justified valuation and a lucrative entry point for investors.
