Despite Microsoft Corporation’s (NASDAQ:MSFT) success in desktop operating systems (OS), the same cannot be said for its smartphone business. With just three percent of the market share globally, the “Windows” OS for smartphones is losing big-time to Apple Inc.’s (NASDAQ:AAPL) mighty “iPhones” and “iOS” and smartphones running on Alphabet Inc’s (NASDAQ:GOOG) “Android” OS. However, the company might be able to bring something that beats the competitors and cheers up Microsoft stock investors—a “Surface” phone.
Could Microsoft Surface Phone Steer People Away from the iPhone?
On a recent Windows Weekly podcast, Microsoft’s chief marketing officer (CMO), Chris Capossela, admitted that the current Windows phones are not going to cut it when the smartphone market is filled with iPhones and Android phones. He said that the company will “have to do more breakthrough work” in order to make Apple fans “pause before they by their 17th iPhone.” (Source: “Microsoft Hints at ‘Surface Phone’ That Could Take on Apple’s iPhone,” The Daily Mail, December 28, 2015.)
As to how the company might turnaround its smartphone business, Capossela made a comparison to Microsoft’s Surface program, which has been highly successful despite “a bunch of early misfires.” He believes that the company needs “some sort of spiritual equivalent on the phone side, that doesn’t just feel like a phone for people who love Windows.” (Source: Ibid.)
Microsoft’s Surface is a hybrid device that blurs the lines between a laptop and a tablet. The two-in-one tablet was first introduced in June 2012 with the newest offering being the “Surface Pro 4.” The unique thing about Surface tablets is that they can run full Windows operating systems, while most competitors run on Android or iOS, which are more streamlined mobile operating systems.
Surface Tablet Successful; Surface Phone Next?
Despite launching two years behind the first “iPad,” Microsoft’s line of Surface tablets has steadily built up its presence. According to the most recent data for online tablet sales, Microsoft has surpassed Apple to become the largest vendor in the U.S. To be more specific, Microsoft Corporation’s share of online tablet sales surged to a massive 45% in October, while Apple’s share dropped to 17%. (Source: “Microsoft Beats Apple in Online Tablet Sales,” WinBeta, December 4, 2015.)
Given Capossela’s reference to the Surface program, some take it as a hint that Microsoft could be working on a Surface phone. The Surface phone could be a hybrid device that brings laptop productivity to a smartphone. Right now, the Windows-supported “Lumia 950” and “950 XL” smartphones can be connected to an external monitor and peripherals to create a desktop-like experience, “but to call it a full Windows environment is a bit of a stretch.” (Source: “Microsoft Hints at ‘Breakthrough’ Surface Phone,” Tom’s Guide, December 28, 2015.)
Microsoft Corporation has successfully turned the two-in-one concept into reality with the Surface line of tablets. If the company decides to go ahead and make a Surface phone, there could be refreshed interest in MSFT stock.