Must-know: Will Microsoft’s Surface Pro 3 tablet succeed?

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Can Microsoft's Surface Pro 3 tablet challenge Apple's products? (Part 1 of 5)

Microsoft unveils its Surface Pro 3 tablet

On May 20, Microsoft (MSFT) introduced the Surface Pro 3 tablet, its largest-ever tablet with a screen size of 12 inches. Microsoft claims this tablet has the potential to replace laptops, serving a two-in-one purpose as both a tablet and a laptop. This is the fifth version of the tablet that Microsoft has launched, after it launched Surface RT and Surface Pro in June 2012, and then Surface 2 and Surface Pro 2 in October 2013. However, these initiatives didn’t result in success, which meant price reductions and discounts on Microsoft’s tablet series.

Microsoft still struggles in the tablet market

The iShares U.S. Technology ETF (IYW) and Technology SPDR (XLK) are some of the ETFs that have decent exposure to Microsoft. As the chart above shows and as reported by Gartner, Microsoft’s share increased only slightly from 1.0% in 2012 to 2.1% in 2013 in the tablet operating system market. This market is dominated by Google’s (GOOG) Android OS, for which the share increased from about 46% in 2012 to 62% in 2013, while Apple’s (AAPL) iOS share declined from about 53% to 36% during the same period.

Microsoft’s strategy for the Surface Pro 3 may not be successful

The most important thing to note here is whether consumers would want a two-in-one tablet and laptop kind of device. By Microsoft’s own admission, about 96% of people with a tablet also have a laptop. This means people carry both a tablet and laptop for different reasons, so combining these two to form a single device may not be a popular option. Plus, Microsoft has come up with a 12-inch screen for the Surface Pro 3, which is quite large for a tablet and small for a laptop, so it might not do for any of the uses people require.

Continue to Part 2

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