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Surface Tablet Likely to See Minimal Holiday Sales, Says Analyst


Microsoft positioned to do well in the enterprise market.

MINYANVILLE ORIGINAL AllThingsD reported this morning that Apple (NASDAQ:AAPL) announced it will host an invitation-only special event on October 23, where it is expected Apple will reveal the iPad Mini.

The October 23 date places the event (likely intentionally) three days before Microsoft's (NASDAQ:MSFT) launch of Windows 8 and its Surface RT tablet.

Microsoft will release Windows 8 in New York City on October 25 and begin selling Windows 8 and its Surface RT tablet, which runs Microsoft Home and Student 2013 RT, on October 26. Windows RT is the ARM version of Windows 8; it's a simplified version of Windows 8, which will support app-style versions of Microsoft Office. The tablet will use an ARM processor like the iPad, and it will have Wi-Fi accessibility.

As for competition with the iPad Mini, the Surface tablet will probably struggle in the fourth quarter against existing competitors whether or not a new Apple tablet hits the market. Yun Kim, an analyst with ThinkEquity, said in an interview, "Overall, I'm not expecting any great things from the Surface in the consumer market for the upcoming holiday shopping season." Further crowding of the tablet market by an iPad Mini will only make it more difficult for the Surface to attract buyers.

Microsoft lacks brand awareness as a tablet provider, and "the only thing going for the Surface initially is that it has the Microsoft Office RT." However, for consumers this reason is "not that compelling."

Kim explains why to investors:

The PC market had a good run from 2005 to 2008, driven by the consumer market. Individuals would buy a second or third PC for their household. However, these second and third PCs are being replaced by tablets, driving the decline of PC in the consumer market. This is why Microsoft obviously needs to get involved with tablets.

Second and third PCs are not necessarily used for productivity purposes, though, like using Excel for accounting and business work. These PCs are used as devices for tasks such as accessing the Internet, multimedia content, and email. With tablets replacing these computers for these purposes, I don't know how compelling Microsoft Office RT for tablets will be for the consumer market.

I think initially the consumer market will be very tough to break into for Microsoft with the Surface tablet. Especially with an iPad Mini being introduced, I don't see how they can compete on price.

The price of the Surface makes it more expensive than its counterparts. According to ZDNet, Microsoft briefly revealed on its website today the prices of the Surface tablet before pulling down the information.

The Microsoft website listed the 32GB base model of the Surface RT tablet at $499. Tablets with the black multi-touch TouchCover keyboard feature increases the price to $599, and the 64GB tablet with a black TouchCover keyboard costs $699. The iPad Mini will likely have a price tag of $299. However, the 32GB Surface RT is cheaper than Apple's 32GB Wi-Fi iPad, which sells for $599.

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