Is Microsoft Corporation (MSFT)’s Tablet Simply Misunderstood? – Apple Inc. (AAPL)

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This week, research firm IDC released its latest projections for the tablet computer market, showing that for the entirety of 2013, Microsoft Corporation (NASDAQ:MSFT) is expected to grab nearly 5% of the market. While the thrust of the report was that for the first time Google Inc (NASDAQ:GOOG)‘s Android is expected to take the market share lead over Apple Inc. (NASDAQ:AAPL)‘s iOS, there was some critical information about Microsoft’s position within the market. IDC projects that the overall tablet market will continue to grow at a rapid pace, and Microsoft is expected to experience the largest percentage increase among all three players. If the company is able to learn something from this report, it may be able to grow its share even more rapidly than expected.

Microsoft Corporation (NASDAQ:MSFT)

Microsoft’s role in the tablet market
Last fall, Microsoft Corporation (NASDAQ:MSFT) released its first computer — a tablet dubbed the Surface RT, to differentiate it from the Surface Pro. The former runs a light version of the Microsoft operating system, and the later runs a full version of Windows, yet both exist in the tablet form factor. These devices have received mixed reviews, with some commentators believing that the Surface Pro in particular has the chance of changing personal computing, while others see it as functioning well as neither a tablet nor a laptop.

Because each has its own operating system, IDC breaks each out separately in its report. According to projections, Windows is expected to command a 2.8% market share in 2013, and Windows RT is expected to get 1.9%. The size of the overall market is expected to swell to 190.9 million units, up from the 172.4 million that IDC had predicted at the time of its last report. Future growth is expected to bring the total size of the market to 350 million units by 2017.

Looking forward, IDC expects Microsoft to grow its Windows tablet market share to 7.4% by 2017 and its Windows RT market share to 2.7%. The combination would give Microsoft more than 10% of the tablet market and represents 35 million units by that date. When compared with the numbers for Surface and Surface Pro thus far, that represents explosive growth.

Apple Inc. (NASDAQ:AAPL)and Google Inc (NASDAQ:GOOG)‘s relative role
If the pattern in tablets follows what we’ve seen in the smartphone market, Android will continue to grab market share by offering far less expensive devices that appeal to broader demographics. This phenomenon is even more pronounced in the tablet market, because so much tablet use can be accomplished through Wi-Fi networks. That means there are few subsidies available on tablets, so price is an even bigger concern. The cost spread to consumers for top smartphones is never more that $100 or so; the number is far larger in tablets. If Apple Inc. (NASDAQ:AAPL) remains the premium choice at a higher price and Google Inc (NASDAQ:GOOG) appeals to the low-cost market, Microsoft Corporation (NASDAQ:MSFT) will have clearly defined competition in each space and should be able to react accordingly.

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