At the Goldman Sachs Group, Inc. (NYSE:GS) Technology and Internet Conference this week, Microsoft Corporation (NASDAQ:MSFT) CFO Peter Klein hinted at what other types of hardware the software giant may have in its pipeline. Will Microsoft shrink its Surface tablet?
That’s what he said
Klein said that Microsoft Corporation (NASDAQ:MSFT) is ready to expand the types of mobile device form factors that Windows can power, moving to both smaller and larger devices depending on consumer preference. “We’re set up for that,” Klein added, “The notion of flexibility and scalability of the operating system is intrinsic to our strategy.”
Reading between the lines
Of course, Klein is specifically referring to Windows devices made by anyone. That certainly includes its wide army of hardware OEMs, but also strongly hints that the company is planning to pursue a smaller Surface tablet.
Steve Ballmer has made it clear that Microsoft Corporation (NASDAQ:MSFT) is coming after nearly all of Apple Inc. (NASDAQ:AAPL)‘s market segments. Recall Ballmer’s words last summer when speaking with CRN:
We are trying to make absolutely clear we are not going to leave any space uncovered to Apple. We are not. No space uncovered that is Apple’s. We have our advantages in productivity. We have our advantages in terms of enterprise management, manageability. We have got our advantages in terms of when you plug into server infrastructure in the enterprise. But we are not going to let any piece of this [go uncontested to Apple]. Not the consumer cloud. Not hardware-software innovation. We are not leaving any of that to Apple by itself. Not going to happen. Not on our watch. We do feel empowered to innovate everywhere and bring our partners with us. We are just not going to leave any — what’s the expression people like to use — we’re not going to leave any stone unturned, so to speak, as we pursue that.
With Apple just recently entering the small-sized tablet market with the iPad Mini, Microsoft Corporation (NASDAQ:MSFT) has to follow suit if Ballmer wants to keep his word. No space uncovered, right? On top of that, Ballmer has made it clear that Microsoft’s future is becoming a “devices-and-services company.” Devices. Plural.
It’s also plain to see that consumer preference in the tablet market is heading toward smaller form factors. The iPad Mini is a hit even with its lackluster display. Apple couldn’t make enough of the device last quarter due to booming demand.
Amazon.com, Inc. (NASDAQ:AMZN) continues to enjoy success with its Kindle Fire, and the larger one doesn’t seem to be selling very well. That means that those 6 million units that it shipped were probably mostly the 7-inch flavor. Google Inc (NASDAQ:GOOG)‘s Nexus 7 is also a hit, and the search giant probably sold around 3 million of those during the fourth quarter.
Steve Jobs was wrong when he said that a 10-inch display is the perfect size for a consumer tablet. The 7-inch to 8-inch size really is the sweet spot for this type of mobile device. Consumers are clearly voting with their wallets and it’s so obvious that not even Microsoft Corporation (NASDAQ:MSFT) can miss this one.
Surface tension
There was also speculation late last year that Microsoft was already about to expand the Surface family, shortly after the launch of Surface Pro, which was just this month. That could include second-generation models to both Surface RT and Surface Pro, but also potentially taking the Surface brand a step farther with a Surface Book laptop. A Surface Mini doesn’t sound like such a stretch.
The article Microsoft Surface’s Inevitable Shrinking 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 Amazon.com, Apple, Goldman Sachs, and Google. The Motley Fool owns shares of Amazon.com, Apple, Google, and Microsoft.
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