Analysis: How Surface Pro 3 May Help Apple Mac Share Numbers

Recently Architosh published a story on a bullish projection of Mac market share numbers going forward. To be fair, the projection is extremely bullish, even based on the broad range of factors that the article lists as possible “tipping point” drivers.

To be perfectly honest, it isn’t really necessary to talk about the Mac’s continued success as depending on some kind of tipping point phenomena within the market; the Mac will mostly certainly continue to outpace the PC for years to come based on its consistent momentum alone, a sustained outpacing of the Windows PC market for 34 of the last 35 quarters.

MORE: Analysis: How PC to Mac unit ratio will reach 1991 levels by 2019

But here is the interesting part. The Mac’s share rise in proportion to the PC will continue to rise partly due to something much more basic than market transformation. It has to do with the way things are counted and Microsoft’s own tablet strategy.

Why the Surface Pro 3 Helps

This isn’t some kind of subversive trick the Surface Pro is playing out on Microsoft. In fact, the success of the Microsoft Surface Pro 3 will play itself in favor of Microsft’s share of the tablet numbers where iPad and Google’s tablets compete (and are counted), rather than in the Windows-devices category we know as PC—desktop and laptop computers.

And that’s the big difference. Back in 2013, IDC changed its policy on machines like the Surface Pro 3. If the device can be detached from and be used without a keyboard, it’s a “tablet” and no longer counted as a PC. It doesn’t matter if the device runs whatever version of Windows. To IDC, if it meets that criteria, it’s now going to be counted as a tablet, and run into the mix with Android and iOS based tablets.

01 – Microsoft Surface Pro 3 is often touted as the tablet that can replace your laptop and with IDC counting such devices (if the keyboard can be detached and the device can still fully function = tablet). (image: courtesy, Microsoft Inc., All rights reserved.)

The thing about Surface Pro 3 is that it is doing rather quite well. All things considered, it is hardly making a dent in the iPad and Google tablet universe, but it is growing rapidly and at the expense of regular PC laptops. According to this report back in October in PC World, the Surface Pro 3 is growing at twice the rate of the Pro 2. And as the reporter for the article posted: “…it’s become this reporter’s work PC.”

Even Microsoft sees the Surface Pro 3 as a unifying device. Nearly a year ago Panos Panay, corporate VP, Microsoft Surface, boasted: “So many people carry both a laptop and a tablet but really just want one device that serves all purposes. Surface Pro 3 is the tablet that can replace your laptop.”

The Tablet to Replace Your PC

It is interesting how both the market and even tech journalist interchange the terms tablet and PC with respect to the Surface Pro 3. But to Microsoft, officially, the Surface Pro 3 isn’t just a “tablet,” and not a PC, but “the” tablet to replace your PC. And more importantly, and with key relevance to Mac, IDC sees the Surface Pro 3 as a tablet.

So what does this replacement look like across the numbers?

That’s where things get murky. Microsoft is not releasing units sold in its quarterly reports, only revenue driven by the device. With Pacific Crest analyst Brendan Barnicle estimating an average selling price of 863.USD, Microsoft’s 2014 third quarter earnings of $900 million calculates out to…a little over 1 million units.

So in the same quarter that Microsoft likely sold 1 million Surface Pro 3 units—the tablet that can replace your PC—the overall PC market shipped 74 million units. Of those roughly 2/3 were traditional laptop PCs, or approximately 48 million. If the Surface Pro 3 is replacing such machines then currently it is replacing a tiny fraction (1/48) thereof.

A Confusing Battle Plan

For the record, 1 million Surface Pro 3 (tablets) compares to Apple’s 12.3 million iPads shipped in the same fall quarter. In the holiday quarter (Apple’s fiscal Q1-2015) Apple would ship 21.42 million iPads, while Pacific Crest analysts Brendan Barnicle projected Surface Pro 3 sales of $1.2 billion, while the actual sales value as reported by Microsoft was $1.1 billion, or approximately 1.4 million Surface Pro 3 units.

So let’s be clear. Microsoft’s Surface Pro 3 tablet is hardly making a dent against Apple’s iPad. And it’s also hardly making a dent against traditional PC laptops.

What’s bizarre about all of this is that while Microsoft recognizes its Surface Pro 3 convertible device is for all intents and purposes a tablet (and being counted as one) Microsoft’s Surface Pro 3 TV ad campaign pitted it against Apple’s svelte MacBook Air mobile computer.

02 – Microsoft’s TV ad spots pits the Surface Pro 3 directly against the laptop of its arch enemy. But the company admits its strength is in attracting folks who are attracted to and used to Windows and want a tablet. The marketing strategy is interesting but albeit a bit confusion. (image: YouTube ad hosted, screen shot.)

This message is saying to the market that the Surface Pro 3 is a new kind of laptop computer, designed to compete with a combination of popular Apple laptops and its iPad all at the same time. It’s saying to the market, “don’t buy that MacBook Air and also get an iPad, just buy me!”

Conclusions

Given Apple’s sales figures and year-over-year growth with Mac (which is highly mobile driven), Microsoft’s clever Surface Pro 3 ad isn’t yet doing much damage as intended. Moreover, given its still puny unit shipments, (1.4 million vs 21.42 million) it his hardly denting Apple’s spot in the tablet universe either.

What is brilliant about Apple’s iPad line up is that it is not designed to compete with the MacBook lineup. Unlike Microsoft, Apple’s MacBooks are not really suffering at the hands of the iPad and vice versa. Keeping it that way long-term will take innovation driven at market-segment focus.

For the time being however, Microsoft seems to have hit a stride with its Surface Pro 3 and copycat models will likely follow. But in an interesting twist, if they fail to meet the objective of the TV ad spot and instead cannibalize traditional PC laptops, the net effect as far as IDC sees it will be increased market share for Mac versus PC.