The fact that Microsoft (NASDAQ:MSFT) has been struggling with its foray into the tablet market is something that hasn’t really been questioned lately.
When the Surface RT was released in time for the holiday quarter, lineups failed to materialize at Microsoft stores and sales were below expectations. Back in January, CNET was reporting iSuppli had pegged actual sales of the Surface RT during the holiday quarter in the 680,000 to 750,000 range, even though Microsoft claimed to have shipped 1.25 million of the tablets.
In comparison, Apple (NASDAQ:AAPL) sold nearly 23 million iPads in the same quarter. When the Surface Pro was released in February, there were sellouts but the culprit was inventory shortages of popular models. With a $899 starting price, a bulky form factor, slow Windows 8 adoption and finger pointing over misleading storage claims, the Surface Pro appeared to have a relatively limited market.
In short, despite all the Microsoft hype, no one was expecting the Surface tablets to be a homerun. At least not in their initial version.
So what on Earth do you make of the news that just popped up on ZDNet, saying Windows captured 7% of the global tablet market in Q1 2013?
Gotta be a typo, right? Nope.
According to a report by Strategy Analytics, Apple shipped 19.5 million iPad in Q1 for a 48.2% share, vendors using Google’s (NASDAQ:GOOG) OS shipped 17.6 million tablets for a 43.4% share and 3 million Windows represented a 7.4% cut — even bigger than suggested by the ZDNet piece.
When a market share report seems to fly in the face of expectations, its time to poke deeper and see if there’s some detail that’s maybe spiked the data. In this case there are a few potential red flags that immediately come to mind:
- Sold vs. shipped: They aren’t the same thing and as mentioned earlier, iSuppli already called out Microsoft on this when they said holiday Surface RT sales were only 55% to 60% of shipped units.
- The tablet label: This sounds like a stupid question, but at the Consumer Electronics Show in January, Intel (NASDAQ:INTC) introduced a requirement for touchscreen capability in order to gain Ultrabook certification. With Windows 8’s touch-friendly design, many PC manufacturers had already begun putting out hybrid portables that could convert between tablet and laptop form factor. Heck, there were even desktop PCs at CES that transformed into tablets. Could some of these hybrid devices be finding their way into the count?
Let’s take a closer look.
First up, sold versus shipped. In this case, the analyst clearly specifies shipments, but defines this as sell-in. In the case of Apple’s iPad, shipments have always matched very closely with actual sales. With Windows tablets, we only have that holiday quarter to go from, but if iSuppli’s findings are consistent and depending on how sell-in is defined (it usually indicates sold to a retailer, but not purchased by an actual customer), up to 1.65 million of those Windows tablets could still be sitting in warehouse or on store shelves.
And what about that tablet definition? Well, according to Strategy Analytics, the numbers do not include convertible PCs or e-readers. I hadn’t even thought of e-readers, although I’ve never seen a Windows 8-based one. Anyway, tablet definition doesn’t seem to be an issue here.
So where does this leave us?
I’m still not entirely convinced that Windows has managed to pull off such rapid growth in tablet market share and I suspect that the shipment vs. sell-in vs. consumer purchase issue may end up having something to do with that big number. If I saw a report today that Windows had captured 3 or 4% of the tablet market, I’d be willing to believe that, but over 7% seems high.
Then again, maybe Microsoft sold a ton of Surface Pros to business customers … I guess.
Don’t get me wrong, I think that Windows 8 in particular has a future as a major player in the tablet market. I’m firmly in the iPad camp in terms of personal use (there are five iPads currently kicking around the house), but after spending a month with a Windows 8 tablet from Toshiba (PINK:TOSBF), I was quite impressed with the experience.
I also do think the 7-inch Surface Microsoft is expected to release later this year will sell well. And I think the platform will grow and businesses will look to the Surface Pro as a legitimate PC replacement.
But still, if Windows has actually managed to grab a 7.4% market share, all I can say is: “I didn’t see that one coming.” At least not this soon.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.