Microsoft (MSFT) does not officially launch Windows 8 until next week on October 26, but so far, its efforts are proving rocky. There are two problems with Microsoft’s $1.5 billion marketing campaign: The first is confusion for its surface product, and the second is pricing.
Windows RT or Windows Surface
Windows RT is a stripped down version of Windows 8. Costing relatively less than the full version, this tablet does not run existing Windows applications. Consumers will need to buy (or find) these legacy applications on the application store if they want to run them on the RT. If application developers for those programs did not create an RT-version of the application, then it will not be available.
In short, Windows RT tablet does not really run Windows 8, because it’s not as capable. RT does not support “x64/64” installations.
Windows RT Pricing
RT is priced at $499 for 32GB of storage. Preloaded applications installed along with space requirements for the operating system take 12GB, leaving just 20GB of storage available. The basic model will not include a touch cover (an additional $100), and all models will run on an NVIDIA (NVDA) Tegra 3 processor.
The pricing for Windows RT will be:
$499 – 32GB
$599 – 32GB with touch cover
$699 – 64GB with touch cover
The pricing is far higher than 7-inch Google (GOOG) Nexus, Amazon.com (AMZN)’s Kindle Fire, and Apple’s (AAPL) upcoming iPad mini device pricings (assuming leaked prices are accurate).
Analysis:
Forrester conducted a survey to determine what adoption for Windows 8 would be in the enterprise space. Only one-third of respondents are planning to use Windows 8. When Windows 7 was launched, it was two-thirds.
The notion that a recovery in the PC industry will be quick will prove to be incorrect. Windows 8 and the Surface tablet will not provide a short-term positive catalyst for companies relying on PC sales.
Business Section: Further Investing Ideas
Below is a performance chart of the companies relying on strong PC sales and mentioned in this article:
Tip: Click on “Full Screen” to explore these companies and to easily generate comparisons using other valuation criteria.
Written by Chris Lau. To interact and discuss these picks with users, attach your watch list or portfolio in a message to your friends on Kapitall. Message the author. He is ranked sixth (by points) on the all-time leaderboard. The leaderboard is located on your score icon -> Leaderboard. Members on Kapitall earn free points, and even more points with every Kapitall Generation trade. These points may be redeemed at the Kapitall store.
Update:
Microsoft (MSFT): FQ1 EPS of $0.53 ***misses*** by $0.03. Revenue of $16.01B (-8% Y/Y) misses by $410M. FY13 operating expense guidance of $30.3B-$30.9B re-affirmed. Shares -1% AH.
Hey Chris,
Nice article. I like that you compared the Surface with other cheaper tablets like the Nexus or Kindle Fire. To me, it seems as though the Surface is going to be out on an island by itself when compared to other tablets. The Surface, only starting to be advertised heavily, does not have a purpose. It sits in a no mans land; on one hand it tries to be a completely comparable PC and on the other it tries to be a normal tablet. I like that you used "Misguided" as the word to describe the product, but do you see it succeeding in the already saturated market of tablets?
Brendan
I wished Microsoft was aggressive on the price and on the marketing. Pitch one message, and lower the price. Microsoft's only hope now is to sell to the enterprise at that price.
Wishing and hoping aren't words to use for investments. I will review the quarterly results posted today, and update my view in a future article to drill down on when how, and what to see before being more positive for Microsoft's tablet.