Surface versus iPad: A tale of two tablets?

Surface versus iPad: A tale of two tablets?

Summary: Microsoft's Surface sales revenue has surged, while Apple's iPad sales slide: what does this say about the state of the PC market?

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It's a neat juxtaposition for sure: earlier in the week Apple's fourth-quarter 2014 results showed that iPad sales sliding: 12.3 million sold, down from 14.1 million from the same period a year ago and in $5.3bn in revenue, down from $6.2bn — a decline of 13 and 14 percent respectively year-on-year.

And then, a few days later Microsoft's first-quarter 2015 results (which actually cover roughly the same period) told a slightly different story. Revenue for its Microsoft's Surface 'tablet PC' more than doubled over the same quarter a year ago, hitting $908m, which the company said was driven by students, professionals and enterprises.

Microsoft CFO Amy Hood said that the new Surface Pro 3 sales were "pacing at twice the rate of what we saw with Pro 2" and that gross margin for Surface "was positive" as businesses replaced tablets and laptops with the hybrid device.  

Add to this the unexpected resurgence of the PC market (in the US and Europe PC shipments are up year on year according to Gartner) and the increasing evidence that tablets are being squeezed between phablets and hybrid devices, and you have a very different scenario to the one a year or two back, when it looked like tablets were running rampant and the PC was doomed.

In reality, of course, it's a little bit more complicated than that: Microsoft may have come up with a compelling product with the third generation of its Surface Pro, but it's still growing from a very small base and it's not clear how profitable (if at all) the device is. And despite the rise in revenue it's also not clear what Surface unit shipments are doing - much of the rise in revenue may be down the higher cost of the Surface Pro 3 over previous generations of the device rather than higher unit sales.

Meanwhile, Apple CEO Tim Cook points to the 237 million iPads the company has sold over the last four years and describes the drop in iPad sales as "a speed bump". His argument is that there's still plenty of growth left for the tablet — especially in the enterprise, where Apple's alliance with IBM could be a significant factor.

What these numbers really represent is a snapshot of a turbulent device market. When the iPad arrived (and the other tablets that followed), it shook up the PC market so much that it's only now recovering some sort of equilibrium.

The disruption caused by tablets has been painful for some but also very positive — the PC world was dull and had been lacking in innovation for far too long. The emergence of hybrid devices like the Surface and Lenovo's Yoga range shows that manufacturers are thinking much harder about how their devices will be used, which can only be a good thing for customers.

As such, there's room for tablets, ultrabooks, hybrids and everything else in between: rather than focus on narrow battles between particular types of devices, we should celebrate the variety we now enjoy.

ZDNet's Monday Morning Opener is our opening salvo for the week in tech. As a global site, this editorial publishes on Monday at 8am AEST in Sydney, Australia, which is 6pm Eastern Time on Sunday in the US. It is written by a member of ZDNet's global editorial board, which is comprised of our lead editors across Asia, Australia, Europe, and the US.

Previously on Monday Morning Opener

Topics: Mobility, Apple, Microsoft, Tablets, PCs

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205 comments
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  • Anyone not a zealot could have told you this

    I've been so sick of 'the PC is dead' or 'the Post-PC era' rhetoric of or years. Three major factors have had an overriding influence on sales in these sectors:
    1) Tablets are useful devices that give users the ability to perform tasks not possible in a PC or laptop, so initially you have a demand vacuum that sucks up huge numbers of devices to fill this perceived need in the market for something that didn't previously exist.
    2) PC purchasing is cyclical, operating around a four or five year time frame. Plenty of techs promote the idea of biannual refreshes, but other than cutting edge businesses and consumers, the reality is that most try to extract maximum utility out of their devices before they scrap them - Windows 7 sales demonstrated the strength of this model as we saw a boom in sales with a palatable Windows option after the Vista disaster, and many PCs purchased in 2009 would still be perfectly usable with a simple SSD upgrade.
    3) Finite funds - regardless of the promises of tablets, the reality is that it doesn't matter to most if tablets are able to replace your PC or not, the fact is you just shelled out some significant cash for those tablets so you will rationalise that spending by ensuring you extract maximum utility out of it and push back any PC purchase or replacements until you can justify it (either forced to replace failed hardware or upgrading to a compelling new OS). your computing budget is blown on tablets, so even if they aren't a viable replacement for a PC, your cash is spent so it will be a few years before you consider a new PC anyway.

    Windows 10 is coming at a good time - people have experienced tablets and know if they are the replacements they've been promised, or just a complementary device. They've recovered from that purchasing spree and now have the cash ready for their next tech purchase. Surface is a good middle ground, but quite expensive. Windows 10 will be the excuse people are looking for - expect a PC sales resurgence in 12 months.

    And stop drinking the Post-PC cool-aide - the reality is a bit more complex than that condescendingly simplistic generalisation.
    TrevorX
    • You've nailed it.

      I agree 100% with your comments.

      I think it also needs to be pointed out that many of the people who have bought tablets were not, in fact PC buyers ever.

      These are the people who bought it for social purposes and would never have bought a PC. It was, in reality, a new market that appealed to a large group of people who would have previously survived by using work's pc and the one at home for their social mutterings.

      But, more to the topic of this article, the Surface is totally encompassing of any persons needs but it is seen as a 'real computer' and therefore not as attractive as the iPad which has a sort of novelty image and appeals to the masses who look at these devices, almost solely, as the means to communicate with their friends.

      Even though the iPad can be productive, most of its users just want a communication device and see the Surface as overkill for the job. Also. going on my daughter's feelings for the device, if you are in the 'iSnob' social set, the iPad is the 'must have' device. Anything else, no matter how good it really is, is considered unworthy even for consideration and, unlike PCs, you get the new model as soon as it arrives whether your old device is worn out or not. PCs have never had that sort of fan base except maybe amongst the game players.

      To me, there is no comparison, the Surface Pro 3 is the best device ever to hit the shelves but I do not use it for socializing, I use it for computing so the iPad doesn't figure at all. Horses for courses I guess.

      Like you said, 'expect a PC sales resurgence in 12 months'.
      Gary O'Connor
      • Usage Rates

        I also agree with the above comments having had a Surface Pro and now a high end hybrid. I have often wondered what the usage rates are. I know my daughters and several others that have iPads that sit in a desk drawer unused. Some have now gotten Surface's. The ciriteria would be more than 8 hours of usage per week. I will bet for Surface's it is well over 90% and may be close to 100%. For iPads it is probably well below 80% and would not be surprised if it is closer to 50%.
        MichaelInMA
        • I think that's more a result desired by you

          than any actual reality.

          I suspect most people who have iPads probably use them, if for no other reason that most people don't simply throw out $500 investments.

          I've seen no stats on it either way, and other than your personal anecdotes, which may or may not be in good faith, I suspect neither have you.
          Mac_PC_FenceSitter
          • It's reality because I experience it first-hand

            And so do my friends. The iPad is nice but it's just that - nice. I bought one for my wife and after a while she passed it on to my children who after a while just don't bother with it anymore after I got them other toys. In short, after the novelty wears out, you look for something nicer.
            rob95
          • Different Experiences

            As said above, your experiences are completely anectodal. Nothing wrong with that, but you can't predict trends based on anecdotes.

            So I'll see your anecdote and raise you mine: My wife came into an inheritance, and spent money on a high end iPad, anticipating some low-end photo editing and the ability to create other digital artwork on it. She's done both, but also bought and installed a number of games. Unhappy with creating art on the iPad, she bought a Surface Pro 3. She uses the Surface Pro for more of her art now, but she still uses the iPad for a lot of her gaming, since most of the games she plays are only available as relatively expensive desktop applications for Windows, and remain inexpensive apps for iOS.
            online4
          • Disagree

            Most people buy all kinds of things, even expensive things, because they think they want/need them but those expectations do not meet realities. A full PCs on the other had (Mac or Windows) if its your only computing device will get used. I have an iPad I got from work (I have to support them) and I might use it a few times a month at most but I use my iMac 27" every single day for 8+ hours easy.

            My company is planning on deploying Windows tablets next year as general placement devices instead of laptops. We are already buying laptop docks (a lot of duel monitor usage) so we will get docks and portfolio keyboards for these as well.
            Rann Xeroxx
          • Also agree it is reality based on personal experience

            I purchased an iPad mini for my wife because she thought it would be nice to have. It is certainly the device used least in the household. Typically she is on her phone for casual social networking and then on the laptop for emails and other tasks she cannot complete on her phone. I'd imagine if she purchased a phone with 5"+ screen size the iPad mini would be left for dead.
            dj@...
          • Agreed

            My wife and I both bought iPads in April and I have not picked up my nook or my kindle since. I use mine for ebooks and time-wasting games while on the bus, for work composing emails, word docs, and checking building automation, and for watching media from Netflix, Hulu Plus, or YouTube. It's both a consumption and production device. My wife uses hers for almost the same things and uses it to store recipes. She very rarely uses her desktop computer and I use mine for more hardcore gaming.

            I always find the whole "I have an iPad collecting dust/given to kids who ignore it/etc." thing a bit off... maybe it's just me but if I have a high dollar electronic device that works I'll put it on eBay and sell it. I've done that with every single iPhone I've owned and upgraded from and I'm in the process of doing the same with my nook and kindle fire.
            athynz
          • In my case,

            the reason I still have them is because I have my own computer consulting business and if a client has an issue, it is helpful for me to have some experience with the devices, or have an equivalent device handy in order to figure something out.

            As a result, I have an iPad, iPad Mini, 7" and 9" Android tablets, Dell Venue 8 Pro, MacBook Pro, Mac Pro, Windows desktops and laptops.
            TucsonGuy
          • Your mileage may vary

            Fwiw, I've bought iPads for both of my folks, as well as my kids. They all use them quite regularly. My kids also have (Apple) laptops, which also get a lot of use. But for general sitting-on-the-couch-surfing-and-checking-email, the iPads are the go-to devices. My dad has several PCs at his disposal -- a desktop with Win8.1 and a laptop with Win7. The iPad is by far his most-often-used device. (He also has an iPhone.) He comments at least once a week how much he uses the iPad and never uses his laptop or desktop anymore.

            My mother, on the other hand, only has the iPad, now. She had desktops before, but never used them because they were inconveniently located in a spare-bedroom-turned-office. But the iPad she can use in bed, on the couch or while she's just hanging out in the kitchen.

            As for me -- I have work-provided iPhone, iPad, MacBook Pro and (at work) a Mac Pro with VMware Fusion running Win7. I also have Linux & Windows laptops at home, and some other machines. I still use my phone the most, but my iPad gets at least an hour or two of use per day -- usually at night to check email, look up various things on the web, or order stuff. My MacBook Pro probably gets the least usage, unless I need to do late-night support from home.

            So, those are five tales of pretty significant use of iPads. I'm sure PC folks can easily conjure up 5 similar stories of iPads sitting unused.

            But from the numbers given in the story, above, iPad sales are roughly 13x higher than Surface sales, judging by the revenue numbers given. By that measure, Apple still has some way to fall -- and MS quite some distance to climb -- before the two even-out, let alone swap places.

            Ultimately, the tablet market has changed significantly since the iPad came out, just as it had changed significantly between that point and the time -- roughly a decade earlier -- when MS pioneered the tablet market. They're more of a niche device, now ... though PC vendors are making huge strides with the hybrid models. Ultimately, this isn't much different than the automotive industry, which makes cars at every price-point in the spectrum, from no-frills economy models to fully-loaded trucks and high-end sportscars. Which one someone gets just depends on their needs and their bank account.
            imalugnut
          • people do throw out $500 investments

            just look at the jewelry and handbag stores :-)
            ForeverSPb
          • I don't know - my experience coincides with Michael's

            I, too, dumped my Ipad 2 after a year of occasionally picking it up, more out of guilt that I had spent so much money on it (I had purchased the 64 G version) I had an Ultra (Sony Vaio 13) that I turned to for 95% of my work.
            larsonjs
          • Same here,

            the iPad is rarely ever used. My wife found it in the couch cushions where it had been for weeks without being missed. I plugged it in to charge and that's been the total interaction with it. iPad Mini - same. Both Android tablets are rarely used. Used my Lenovo Windows 8.1 tablet the most because it was so thin and light and had a big screen. But, I sold it. Rarely use my laptops, either. My Lumia phone takes care of my needs when out and about, and my 6-core desktop with a 27" UXHD monitor in the center flanked by 2 24" monitors is where I get my real work done.
            TucsonGuy
        • Worse for Apple ... My teenage son just upgraded (with his own money) ...

          ... from an iPhone 5 (his second iPhone) to a MotoX and shortly thereafter sold his iPad 1 (formerly mine) for a Nexus 7. My wife and I upgraded our BlackBerry smartphones to Windows Phone. She uses a Surface RT and I use a Surface Pro 2.

          For a family that has had more iPods than I care to count, the only Apple product in our future will probably be replacement EarPods.
          M Wagner
          • Well, in all fairness

            that household is headed by someone who lobbies hard for Microsoft products, and lobbies hard against just about anything else. Of course it was always going to go that way....

            We're a mixed use household, so people get what they want, and aren't predisposed to see a product's utility in platform religion terms.

            In my parents case, though, I know they've never used anything but Microsoft - so I told my folks a Surface Pro was definitely their thing. I expect they'll be happy with it.
            Mac_PC_FenceSitter
          • Multi-device family

            You sound like my family. I use a Chromebook as my everyday device and rarely use my Windows tablet for anything except for those "Windows-things". My phone is a Nokia Lumia Icon running WP8 (STILL waiting for 8.1! Grrr!). The kids use Nexus 7's but have access to a HP laptop running Windows 7. My wife has an Android phone but also occassionally uses her Windows 8 laptop. Her primary go-to device is a Nexus 7 but she uses a Macbook Pro for work.

            I even have my old trustworthy HP Touchpad running WebOS. Still runs great!

            Future replacements? Yes and no. As long as a product does what I want it to do that's best for me will get the nod. However, I am pulling away from anything MS and want to focus on (or for me, going back to) Android. However, not ever having owned an Apple product, I'm very intrigued by the Air 2 and the iPhone 6.

            Maybe I should just unplug and move to Tibet! :-P
            housepianist
          • Win P 8.1

            I have a Lumia 925 and just installed preview for developers and put 8.1 on it. 8.1 IS a wonderful thing.
            calfee20
          • Android vs Apple for casual consumption

            Can you recommend a good application (preferably operating on iOS) that one may learn playing the piano? I currently own a iPad Air (64g), a iPhone 5S, and last year gave my first tablet (10" Samsung ) to a grandson for his high school graduation.
            Vibrantrich
          • I am shocked

            you have any Apple products. You have to be the biggest MS apologist on this site.
            ctopher5669