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Modest Success Seen For New Surface Tablets

NEW YORK – Microsoft contends its new Surface Pro 3 tablets, like their predecessors, are robust enough to replace your laptop, but analysts don’t think the devices will generate laptop-like sales volumes.

The Surface Pro 3 tablets will likely generate more volume than their Surface Pro 2 predecessors, but they’ll remain a niche seller for multiple reasons, including relative high prices compared to comparably equipped laptops, analysts said.

The expanded selection of Surface Pro 3 tablets is available in five versions with faster Intel CPUs, a screen size that jumps to 12 inches from 10.6 inches, a new clickon Type Cover with improved track pad, and a kickstand whose angle adjusts continuously for more flexible viewing options.

The selection of five Surface Pro 3 tablets, up from four in the Surface Pro 2 line, is priced from $799 to $1,949 compared with the Pro 2’s price range of $899 to $1,799, excluding optional accessories such as the $129 click-on Type Cover and a desktop docking station.

The Surface Pro 3 tablets sport better processors, slightly larger screen with new 3:2 aspect ratio that’s better for tablet use, and a thinner form factor at 0.36 inches versus 0.53 inches, but “they’re not mainstream for the consumer or business person,” said Stephen Baker, NPD’s industry analysis VP. “It’s one of a large number of mobile computing devices products focused on smaller and smaller niches.”

Nonetheless, the Pro 3 will likely generate greater volume than the Surface Pro 2 because it is a better product that will benefit from better distribution and more awareness than its predecessor, he said.

“It runs all Windows programs, but a 12-inch screen is too small for working at a desk and too big to hold for very long,” Baker explained. In addition, “there’s not a lot of volume available at $1,600 or $1,800 on the consumer side, and there is not a lot of evidence of demand on the business side. They’re expensive to give to everyone.”

The Surface 3 products will appeal to high-end road warriors, early adopters, and those interested in wearing off “executive jewelry,” he said.

Excluding Surface sales through Microsoft stores, the Surface 2 tablet has been selling year to date at rates about the same as Chromebooks, 10-inch Android tablets, and two-in-one laptop/tablet hybrids, Baker said. So Surface 2 sales have been “OK within that context.” Higher volume products in the mainstream include 15- inch Windows notebooks, iPads and 7-inch Android tablets, he said.

Richard Edwards, principal analyst for enterprise IT at Ovum, said the Surface Pro 2 “found favor with a small segment of the laptop-buying market, but if Microsoft is serious about Surface 3, then it must price the product to sell, not merely to compete.” He pointed out that the 128GB/Intel i5 Surface Pro 3 will sell at the same price as a “highly desirable” MacBook Air with similar specs, but the MacBook Air “comes complete with a keyboard (essential) and bunch of useful productivity apps (mandatory).” Microsoft Office is not included in the Surface 3 price.

The new form factor, new hinge and a better writing experience with a new pen “all point to compelling ergonomics, but it’s the economics that must now come under scrutiny,” Edwards said. “Surface 3 clearly has some cutting-edge features, but the business value of these is unlikely to meet with universal appeal.”

He also suggested Microsoft “needs to put the icing on the cake with a version of Office that meets this form factor’s sweet spot.” He called Microsoft’s next version of Office – codenamed Gemini – “the missing link.” With the Surface 3 not shipping in volume until August, “Microsoft has time yet to deliver this vital element,” he said.

IDC analyst Jitesh Ubrani doesn’t view the new tablets as laptop killers, and “we don’t expect the Surface Pro 3 to move the needle for all Windows’ shipments in any meaningful way.” Nonetheless, he said, “the device itself does have some compelling features. It’s a laptop that can also act as a tablet which is slightly different from the previous generations, which were tablets (perhaps not great ones) that could also act as laptops.” The enlarged screen and updated internal specs “make this a viable option for the enterprise segment and for people who want to ‘get stuff done,’” he said.

Ubrani also pointed out that Microsoft’s goal for the Surface line has always been “to show off Windows at its best and to inspire Microsoft’s partners.” The Surface Pro 3 “does more of the same, but this time around, it does one more thing,” he said. “It doesn’t compete with partners. By offering a unique design and catering to a very niche market, the SP3 noticeably differentiates itself from the rest of the two-in-1ones.”