An Unflattering Comparison for Microsoft Surface: Microsoft Corporation (MSFT), Apple Inc. (AAPL), Intel Corporation (INTC)

“Open revolt”
Hernandez predicts that in order to spur Surface Pro sales, Microsoft will inevitably be forced to cut prices since it cannot currently appeal to the mainstream market. Unfortunately, such a move will hurt margins and make tense OEM relationships even tenser. The analyst goes as far as to characterize OEMs as “currently in open revolt.”

There’s some credence to this idea. Hewlett-Packard Company (NYSE:HPQ) , the largest PC maker in the world by volume, continues to increasingly tap Google Inc (NASDAQ:GOOG) for its software fix. Just in the past month or so, HP has launched both a Chromebook and a Slate 7 Android tablet. Both of those corresponding launch announcements emphasized a “multiOS approach” and intention to “leverage an array of operating systems.”

Rejection hurts
Windows 8 is “dangerously close to being permanently rejected by consumers,” according to Hernandez. The platform was always a bold bet, but perhaps too bold. The reports that Microsoft Corporation (NASDAQ:MSFT) is offering discounts to OEMs in order to spur touch-based form factors also threatens to undermine Windows profitability in the long run.

Overall, the analyst rates Microsoft at “neutral” alongside a $27 price target, which is right about where shares are now.

The article An Unflattering Comparison for Microsoft Surface originally appeared on Fool.com and is written by Evan Niu, CFA

Fool contributor Evan Niu, CFA, owns shares of Apple. The Motley Fool recommends Apple, Google, and Intel. The Motley Fool owns shares of Apple, Google, Intel, and Microsoft.

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