Microsoft Betting on its New “Surface” Tablet
Thursday, August 23rd, 2012
By George Leong, B.Comm. for Profit Confidential
Apple Inc. (NASDAQ/AAPL) is now the biggest company in the history of the world based on its market-cap of $629 billion as of Tuesday. Prior to this, Microsoft Corporation (NASDAQ/MSFT) held this status back in 1999 when its market cap was over $600 billion. Microsoft’s value in 1999 would be around $850 billion if you discount the inflation adjustment. Microsoft has since seen its value shaved by over 50%.
Based on my stock analysis, Apple is the darling stock of Wall Street. Its global market share for its “iPad” is around 70%, and the company is gaining inroads into China for its devices.
Samsung is the chief rival at this time with its “Galaxy” series of smartphones and tablets, according to my stock analysis. (Read “Heavyweight Bout—Apple vs. Samsung.”)
Former high-flying cell phone maker Nokia Corporation (NYSE/NOK) is struggling to stay afloat straddled with declining growth and losses, based on my stock analysis. Nokia has lost about 90% of its market value since Apple launched its “iPhone” five years ago. Nokia’s venture with Microsoft in building new smartphones built on Microsoft’s “Windows 8” mobile platform (to be unveiled on September 5) will face stiff competition from Apple and Samsung, according to my stock analysis.
There was speculation Microsoft would buy Nokia, but, based on my stock analysis, I doubt this will happen due to the sinking strength of the Nokia brand.
According to my stock analysis, Microsoft will need to grow its mobile business on its own, but this again will not be easy due to the strong brand awareness surrounding Apple.
Even Microsoft’s $300 million investment for a 17% stake in a new division of troubled Barnes & Noble, Inc. (NYSE/BKS) is sinking fast. It was a gamble, but a bad one.
The future for Microsoft will lie with its new “Surface” tablet, but again, I doubt it will be an iPad killer. Microsoft realizes this and understands it needs to get its foot in the door of the tablet market; but it may be too late, unless the Surface tablet turns out to be truly amazing. For Microsoft, this will be its first venture into hardware sales, so it will be interesting to monitor. According to research firm IDC, Microsoft is planning an initial production run of over three million units. This amount is small, considering Apple sold about 17 million iPad units in its fiscal third quarter.
For Microsoft, the initial run will be a test for the market demand, and it will be interesting to see how consumers react to the Surface tablet after comparing it to the iPad and Galaxy.
- Since the beginning of July through to Friday, the small-cap Russell 2000 Index has tumbled 8%.
Historically, the Russell 2000 has led the general market lower.
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In my stock analysis, the key will be the pricing, assuming everything else is equal. Research In Motion Limited (NASDAQ/RIMM) tried to sell a cheaper “PlayBook” tablet, but it failed. Of course, the PlayBook was not a great product and had no clear advantage over the iPad except price.
Circle October 26 on your calendar for the release of the Surface, which coincides with the release of Windows 8. I’m looking forward to the launch. I’m sure Apple is also.
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