From an advertising standpoint, Microsoft Corporation (NASDAQ:MSFT) has made quite a splash with its Surface tablet (check out its latest TV spot here), but a recent note from FBR Capital Markets analyst Craig Berger suggests that sales have been “disappointing” this quarter.
Originally reported by Adrian Kingsley-Hughes of ZDNet, Berger shares with clients that demand for the Surface has “underwhelmed expectations,” which were quite low to begin with. In the article, Kingley-Hughes discusses that “Microsoft was only expecting to shift between 3-5 million Surface tablets this quarter in the first place,” which pale in comparison to Apple Inc. (NASDAQ:AAPL), which “sold three million iPads in the first weekend alone following the release of the iPad mini and the iPad 4.”
While this note, if proven to be correct, may certainly spell trouble for Microsoft’s own tablet, it’s worth mentioning that the Windows 8 operating system — at least in the tablet arena — is expected to perform quite well, according to the latest research report from IDC (which we discuss in detail here). In the report, Microsoft Windows’s share of the worldwide tablet market is expected to be 10.3% by 2016, up from the 2.9% it’s predicted to hold by the end of this year. In terms of actual growth, IDC forecasts that Microsoft Windows will experience a CAGR of 69.2% over this five-year timeframe, far above Apple iOS (20.9%) and Google Inc (NASDAQ:GOOG)‘s Android (21.0%) operating system.
Thus, Microsoft’s main issue looks to be finding an adequate entry into the hardware space that consumers will prefer over other Windows-bearing brands like Asus, Acer and Lenovo. At a price point equal to that of Apple’s iPad and above the iPad Mini, the Surface may not be differentiating itself from the competition enough, even if it has that handy-dandy cover keyboard.
The next logical question that investors must ask is: what does Microsoft have up its sleeve? Well, looking at rather insightful PCWorld piece, “the company plans to launch three new devices in the next year,” at least according to Twitter user “MS Nerd,” a “well-known source of leaks.”
While it’s tempting to ignore these suggestions, it’s worth mentioning that this particular source has been correct about Microsoft leaks before (though not always), and accurately predicted: (1) that Windows 7.8 would be used to give some features of Windows 8 to outdated hardware, (2) “the impending demise of Zune hardware,” and (3) most of the Windows Phone 7 specs.