5 Reasons the New Microsoft Surface Tablet is Not an iPad Killer

With yesterday's (Monday's) debut of the new Microsoft Surface tablet, the company suddenly and unexpectedly took direct aim at the Apple Inc. (Nasdaq: AAPL) iPad.

At the event, Microsoft Corp. (Nasdaq: MSFT) CEO Steve Ballmer unveiled a device with a 10.6-inch widescreen display and a pressure-sensitive cover that also serves as a keyboard. As one would expect, the Surface tablet runs Microsoft's next generation operating system, Windows 8.

Oddly, Ballmer left out several key details, such as the exact date Surface will go on sale and how much it will cost.

What's clear is that Microsoft recognizes it has fallen behind in the mobile market, and that it didn't trust any of its traditional PC-building partners to produce a compelling Windows 8 tablet.

The surprise announcement of the Surface tablet, preceded by an invitation just days before that gave no details, succeeded in generating an Apple-like buzz.

"If imitation is the sincerest form of flattery, the compliments from Microsoft poured down like a torrential storm on Apple last night," analyst Brian White of Topeka Capital Markets wrote in a research note today. "At the same time, this event indicates to us that Microsoft is still searching for its own identity in the post-PC era, something that has come naturally for Apple with the rise of the mobile Internet."

Microsoft Surface Tablet: Not an iPad

Make no mistake; Apple's iPad is the king of the tablets.

According to a report issued last week by research firm IDC, the iPad's markets share will actually increase in 2012 to 62.5% from 58.2% in 2011.

The Surface is just the latest contender for the title of "iPad killer." Throughout 2011, tablets based on Google Inc.'s (Nasdaq: GOOG) Android operating system tried and failed to crack the iPad's market dominance.

Some, like Hewlett-Packard Company's (NYSE: HPQ) TouchPad, were discontinued just months after they were launched. Others, like Research in Motion Limited's (Nasdaq: RIMM) PlayBook, have suffered from sluggish sales.

Now it's Microsoft's turn to take a swing at the iPad, but there are five reasons why it's more likely to whiff than make solid contact:

• Hate for Eight: Surface will run Windows 8, which Microsoft designed to be both a tablet and PC operating system. Though not due out until the latter part of 2012, some hardy souls have been beta testing a public version of it. Many are not happy, however. That raises the specter of a Vista-like disaster - when many Windows users refused to upgrade from XP -- that would rub off on Surface.

"Perhaps its biggest problem is that it has two separate and largely incompatible parts," writes Troy Wolverton on Phys.org. "It feels like Microsoft took a nice dress and attached it to an equally fine pantsuit and tried to pass it off as one garment. It just doesn't work."

• Identity Crisis: Reflecting a basic Microsoft philosophy, Surface wants to be a tablet and a PC. Hence the Windows 8 dual-purpose operating system and cover that doubles as a keyboard. But that approach carries the risk that the Surface won't work well as a tablet or a PC. Worse, it means the Surface probably won't be price-competitive with the iPad.

Further muddying the picture are the different versions of Windows for traditional Intel Corp. (Nasdaq: INTC) chips and ARM Holdings plc (Nasdaq ADR: ARMH) chips.

At the All Things Digital Conference last month, Apple CEO Tim Cook criticized the Microsoft approach: "Products are about trade-offs. And you have to make tough decisions, you have to choose. The fact is, the more you look at a tablet as a PC, the more the baggage from the past affects the product."

• Developers, Developers, Developers: Microsoft is jumping into a market with two established players, Apple and Android. Both have the sort of large user base - driven mainly by the millions of smartphones on those platforms -- attractive to the developers who create apps. It's simple economics: the more users on a platform, the more potential customers. Microsoft knows this and has been working hard to lure developers to write touch-oriented apps for Windows 8. But as long as the biggest profits are in apps for Apple's iOS and Android, that's where developers will go.

• Playing Out of Position: While Microsoft does make hardware, software is its area of expertise and where the company makes nearly all of its revenue. Its record with major hardware is spotty, to say the least. While the Xbox 360 gaming system is relatively successful, the Zune MP3 player never gained traction and the Kin phone was killed just weeks after it launched. Furthermore, Surface directly competes with Microsoft's traditional hardware partners like H-P and Dell Inc. (Nasdaq: DELL). That could drive them to cut back on Windows devices in favor of Android.

• No Cool Factor: With the late Steve Jobs at the helm, Apple became one of the coolest companies on the planet. Apple now can generate a backlog of demand just by announcing an update to the iPhone or iPad. Microsoft on the other hand lost any cool factor it had back in the 1990s. It's hard to be thought of as edgy when one of your flagship products is called "Microsoft Office."

That means no built-in demand for the Microsoft Surface tablet, and the endless comparisons to the sleek iPad won't help, either.

Related Articles and News:

• Money Morning:
  Is Microsoft (Nasdaq: MSFT) About to Get Left in the Dust?
• Money Morning:
  Microsoft Kinect (NASDAQ: MSFT) is Virtual Goldmine
• Money Morning:
  How Apple Investors Can Profit from the New iPad
• eWeek.com:
  iPad to Grow Market Share Over Android Tablets: IDC
• Computerworld:
  Microsoft makes 'radical' move by designing, selling own Surface tablets
• PCWorld:
  Microsoft Previews Surface Tablet
• Business Insider:
  'Microsoft Is Still Searching For Its Own Identity In The Post-PC Era'