Can Apple Reclaim Lost Ground from Microsoft’s Surface Pro with a bigger iPad?

Can Apple Reclaim Lost Ground from Microsoft’s Surface Pro with a bigger iPad?

Can Apple Reclaim Lost Ground from Microsoft’s Surface Pro with a bigger iPad?

Apple Inc. (NASDAQ:AAPL) has been facing declining iPad sales over the last six quarters, but the firm seems to think a bigger iPad will help it to regain the market share that has been lost to Microsoft’s Surface Pro.  Recent Apple rumor suggests that the firm will unveil a bigger iPad (dubbed iPad Pro) at its September 9 event holding at the Bill Graham auditorium in San Francisco.

If the rumor is true, Apple will be making a move to bigger screens for the iPad to challenge Microsoft (NASDAQ:MSFT) Surface Pro tablets in the same way that it launched a bigger iPhone 6 Plus to challenge Samsung’s phablets. This piece seeks to explore Apple’s chances of reclaiming lost ground in the tablet space and Microsoft’s position, now that Windows 10 promises to change the face of personal computing.

Apple and Samsung Lose Tablet Market Share to Microsoft

Apple has been losing market share even though it still has a lead in the tablet market. In February, IDC reported that Apple shipped 21.4 million tablets in Q4 2014 to control 28.1% of the volume share for tablets. However, its sales figure shows a 17.8% year-over-year decline in tablet sales. In Q4, 2013, Apple shipped 26 million units of its iPad to account for 33.1% of the market. iPad sales have had a consistent drop in the last 6 quarters and the firm saw a 23% drop in revenue to $4.5B in the last quarter.

Samsung (KRX: 005930) maintained second position in Q4 2014 as it shipped 11 million tabs to account for a 14.5% market space. Its sales volume shows an 18.4% year-over-year decline in tablet sales. In Q4, 2013, Samsung shipped 11.3 million units of its tabs to account for a 17.2% market share. Amazon (NASDAQ:AMZN) is gradually being edged out of the tablet race as buyers decide that they want to do more on tablets than read books on Kindle. Amazon lost a massive 69.9% market share in the tablet space as it sold 1.7 million units in Q4 2014.

Meanwhile Microsoft has been gaining market share in the tablet space as the volume sales of its Surface Pro continues to soar. In Q3 FY 2015, Microsoft recorded a 44% increase in revenue to $713 million. In the last quarter, Microsoft reported a massive increase of 117% to $888M, its FY revenue increased 65%, and full fiscal year 2015 Surface revenue is on track to touch $4B.

Jean Philippe Bouchard, Research Director at IDC confirms why Microsoft seems to be winning in the tablet space. He says, “Microsoft’s new OS, a general shift towards larger screen form factor and productivity focused solutions, and technology innovations such as gesture interface that could be introduced in tablets will help the market maintain positive growth in 2015.”

Here’s What we Know About the iPad Pro

Mark Gurnam of 9To5Mac tends to be a reliable source on Apple-related news. He writes that the iPad Pro might be unveiled next week, its pre-order campaign should start at the end of October, and it should be in the stores by November.

The upcoming iPad Pro will be a larger-sized tablet with a 12-inch screen (measured diagonally). It will be powered by iOS9.1, with optimized versions of the Siri and Notification Center interface. It will have speakers on both sides for an enhanced media experience. iPad Pro will sport a Force Touch-based stylus, similar to the technology in the Apple Watch. It will also boast multi-tasking features such as split screens and picture-in-picture mode.

Will the iPad Pro make a Difference?

It is obvious that Microsoft’s positioning of the Surface Pro as the tablet that can replace your laptop is working. Research firm, Gartner expects worldwide sales of 2-in-1 devices to soar 70% annually to 21.5 million units this year. Tracy Tsai, a research director at Gartner notes “The combination of portability, productivity and flexibility of touch and a keyboard in one device is attracting some notebook and tablet users to replace their devices with hybrid form factors.”

Microsoft’s Surface Pro is equipped with a versatile productivity suite in the form of Microsoft Office. Its large screen form factor and the support of a physical keyboard also add to its appeal. The launch of Windows 10 also helps to cement the growth prospects of Microsoft’s Surface tablets. To start with, Windows 10 has been having rave reviews – the Continuum Mode and the teased Universal Apps will also help to users to do more with their tablets.

The market expects that Apple’s rumored iPad Pro will help the firm reposition its tablet as a powerfully packed mobile suite of productivity tools. Apple has never been one to shy away from making an about face to meet a market need in its products. It did an about face with the launch of a large-screen iPhone 6Plus. Apple is rumored to be making an about face to reposition the iPad. Now Microsoft has a target on its back, and the tablet wars just got tougher.

 

Stocks Discussed: Apple (AAPL), Microsoft (MSFT), Amazon (AMZN), Samsung

Tags: Apple, iPad, iPad Pro, Microsoft, Surface Pro, Android, iOS, Windows 10

 

By Veselin Valchev
Veselin is a data scientist with extensive experience in commodities and natural resources within the FTSE 100. His data analysis skills ensure he reports without missing the fine details.
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