Is Microsoft Being SNEAKY?

Microsoft Corp. (NASDAQ:MSFT) recently unveiled its own Windows-powered tablet computer called Surface. It is the first computer the software giant has ever made and will come in two versions. One version will run on Windows RT, while the other will be powered by Windows 8. Although the Surface is being instantly compared to the Apple Inc. (NASDAQ:AAPL) iPad, Microsoft’s move into the tablet space is also about protecting its enterprise market share and distancing itself from lagging PC makers.

The Windows RT Surface is an obvious reply to the iPad, three years later. It has almost identical dimensions to Apple’s tablet and will “be priced like comparable tablets,” according to Windows Chief Steve Sinofsky. Having the hottest tablet on the market has allowed Apple to set the price benchmark for the tablet industry. Any company expecting to compete with Apple among consumers knows it will have to price match the iPad or better. However, the Windows 8 version appears to be more about enterprise, as it is expected to cost a significant amount more than the majority of iPads. Unknown sources tell DigiTimes that the Windows 8 model with Intel Corp.’s (NASDAQ:INTC) Ivy Bridge processor will cost “at least above $799.”

The design of the Surface also leans more towards PC than tablet. One of the most notable features from Microsoft’s tablet is the built-in kickstand and magnetic cover. On the inside cover, users will also find a full keyboard with pressure-sensitive keys and a trackpad. “The Surface is a PC, the Surface is a tablet and the Surface is something new that we think people will really love,” claimed Steve Ballmer, chief executive officer.

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Microsoft is the dominant player in enterprise, but Apple is making its presence known. Earlier this year, market research firm Forrester Research reported in its Global IT Market Outlook that business users will spend $10 billion on iPads and $9 billion on Macs in 2012, representing a 58 percent increase from last year. In contrast, computers powered by Windows and tablet PCs in the enterprise market are expected to decline 3 percent. Corporations are expected to spend $28 billion on Apple computers and tablets in 2013. With Microsoft failing in the smartphone and music player market with the Kin and Zune, it is becoming increasingly important to protect its enterprise business.

So why is Microsoft building its own tablet PC for enterprise and consumers? The past attempts by companies such as Hewlett-Packard Co. (NYSE:HPQ) and Dell Inc. (NASDAQ:DELL) have been disastrous. Last year, HP launched its TouchPad tablet, but discontinued it just two months later, citing poor sales. In fact, interest was only shown for the TouchPad when the company placed a fire sale price of $99 on remaining units. Meanwhile, Dell crashed and burned with its own Streak 5 and Streak 7 tablets. Both companies are also in the process of implementing cost reduction plans as they struggle in the Apple-era. Last month, HP announced plans to cut at least 27,000 jobs by October 2014. Dell also said it plans to trim expenses by $2 billion over the next three years, which will come from supply chain streamlining and reducing sales support staff.

Hewlett-Packard (NYSE:HPQ) and Dell (NASDAQ:DELL) are counting on Windows 8, expected to be released this fall, to spark PC demand. However, Microsoft’s (NASDAQ:MSFT) announcement will certainly dampen some of that enthusiasm. The two versions of Surface should be seen as a dual play, one for consumers and one to protect its enterprise business. It took matters into its own hands because there are few companies left standing with the resources to make an attempt to challenge Apple or become a successful number two tablet maker. Only time will tell if Microsoft can succeed in either.

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