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Surface Mini: Why MSFT Won’t Win By Going Smaller

Microsoft may be planning a Surface Mini in an attempt to gain market share

Going smaller was the key to Android overtaking iOS to become the top-selling tablet platform. But that strategy — a la a “Surface Mini” won’t have nearly the same effect for Microsoft (MSFT).

Surface Mini? Why MSFT Won't Win By Going Smaller
Source: Microsoft

See, rumors are ramping up that Microsoft (MSFT) is prepping a smaller, cheaper version of its Surface tablets — a Surface Mini — for release. But while going smaller might have worked for GOOG other tablet makers, but I don’t think MSFT is going to see the same reception if it chooses to release a Surface Mini.

Here’s why.

When Small Worked

Initially, competitors were unable to crack Apple’s (AAPL) stranglehold on the new market, but companies like Barnes & Noble (BKS), Amazon (AMZN) and then Google (GOOG) eventually hit on a winning strategy. These companies began to churn out smaller, 7-inch tablets. The smaller form factor let them cut costs, market the products as being more portable and kicked off the erosion of the iPad’s dominance.

When Apple finally responded with the iPad Mini in 2012, the smaller and cheaper iPad quickly became Apple’s best-selling tablet, proving the consumer demand for this form factor.

Apple’s iPad Air and iPad Mini have been adopted by some business users, but their core strength is in casual use. They excel as game platforms, for watching video, surfing the web and checking email. There are people who use a full-sized iPad or even an iPad Mini for productivity.

But as I pointed out in a recent overview of the best tablets for getting work done, the iPad pales in comparison to Microsoft’s Surface tablets as a serious productivity tool.

Where the Surface Mini Would Come Up Short

A Surface tablet running Windows 8 (or Even Windows RT) offers mouse support, user-level access to the Windows file directory, the option of a cover with full-sized keyboard, a built-in kickstand for setting up on a desk and even the ability to buy a docking station complete with USB ports and ethernet. The tablet’s large 16:9 widescreen HD display is awkward to use as a casual web surfer, but shines in landscape mode with the kickstand, where it becomes a very usable laptop replacement. Surface tablets running Windows 8 can also install and use standard PC applications.

Web use stats have confirmed that Surface tablets have a proportionately higher use percentage during the 9-5 period than either the iPad or Android tablets, suggesting that Microsoft’s strategy of appealing to the enterprise tablet market is working.

Despite the inroads, Microsoft’s tablet share remains dismally low. According to Gartner, in 2013, just more than 4 million tablets were sold worldwide running a MSFT operating system. That’s a 2.1% share. Compare that to Apple, which sold 16.4 iPads in a single disappointing quarter this year where the iPad Mini was apparently in short supply. Android tablet makers, meanwhile, moved nearly 121 million units in 2013, helping to drive the average selling price of a tablet in the U.S. down to $343 (compared to $445 the year before).

With the Surface 2 starting at $449 and the cheapest Surface Pro 2 at $899, it would be tempting for Microsoft to push out a Surface Mini in an attempt to capture some of those tablet buyers with thinner wallets.

However, Microsoft still significantly lags Apple’s iTunes Store and Google Play when it comes to apps, especially games. The company is also weak on digital media sales, and a Surface Mini would lack the seamless integration other platforms enjoy for accessing movies, music and e-books.

Next Page

Casual users are swayed by content availability. Although it would be more portable and cheaper than a full-sized Surface tablet, a Surface Mini seems unlikely to help Microsoft make significant gains in a casual market currently dominated by tablets like the iPad Mini, Google Nexus 7, Kindle Fire HDX and Samsung’s (SSNLF) huge selection of Galaxy Tabs, Pros and Notes.

Business users don’t care as much about games and media integration — being able to install Word, Excel or even Photoshop is more important than playing the latest freemium game.

But a Surface Mini would have reduced usefulness for many business applications.

I can review an Excel spreadsheet on my full-sized iPad Air; on an iPad Mini, the text becomes so tiny that it’s barely readable (yes, you can pinch and zoom to magnify sections, but that’s very fussy). Any cover with a built-in keyboard means the concession of typing with miniaturized keys, which is OK in a pinch, but hardly ideal for regular use as a productivity tool.

With the exception of specialized tasks — such as a handheld tablet for use in the field — smaller is not better when it comes to business tablet users, even if that does result in a small cost savings.

Bottom Line

Since business users tend to be less price-sensitive than consumers, shaving $100 or even a few hundred dollars off the Surface with a Surface Mini isn’t likely to goose corporate adoption.

At the same time, shrinking that 10.1-inch display on current Surface tablets down to the 7 inches most Android tablets offer — or even the 7.9-inches of Apple’s iPad Mini — is going to make a Surface Mini much less useful to the majority of its enterprise market.

Microsoft might decide to pull the trigger and release a Surface Mini. If it does, the company might just strike gold and see iPad Mini with Retina Display levels of enthusiasm resulting in a big boost to that 2.1% share.

But I think it’s more likely to end in a Surface Mini fire sale and the kind of epic losses MSFT suffered with its original Surface RT.

As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.

Article printed from InvestorPlace Media,

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