The Street today is pondering dueling tablet computer announcements, or possible announcements: Microsoft‘s (MSFT) press release setting pricing for its Surface tablet computer, and Apple (AAPL) sending out an invitation to a press event in San Jose next Tuesday, October 23rd.
Microsoft will charge $499 and $599 for the 32-gigabyte version of its Surface with Windows RT tablet, with the difference being the inclusion of Microsoft’s “Touch” cover. Another version for $699 will come with 64 gigabytes of flash storage and the touch cover. Microsoft is also selling a “Type Cover” that’s more like a traditional keyboard, for $129. The device can be pre-ordered starting today from the Microsoft Surface Web site.
The “RT” model of Surface runs Windows 8 on chips not from Intel (INTC), provided by competitors such as Nvidia (NVDA) and Qualcomm (QCOM), using chip designs from Intel’s rival ARM Holdings (ARMH). The “Surface Pro” using Intel chips will be released later.
Apple’s announcement was typically cryptic, but John Paczkowski of AllThingsD reports his sources indicate the event will feature the much-rumored smaller version of the iPad, plus a 13-inch MacBook Pro with “Retina Display.”
Assuming next week’s event is, indeed, another iPad model, then both tablet devices will go up against those based on Google‘s (GOOG) Android, such as Amazon.com‘s (AMZN) Kindle Fire, Samsung Electronics’s (005930KS) Galaxy Note 10.1 and Galaxy Tab series, and Google’s own Nexus 7.
Barclays Capital’s Raimo Lenschow, who has an Equal Weight rating on Microsoft shares, this afternoon writes that the price is not a surprise and the onus is on Microsoft to show real traction with the Surface:
Given Barclays is currently forecasting total tablet shipments of 40.6m in Q4, this would imply a market share of ~10%, which we believe is rather aggressive given the price point and the limited supply chain activity around Windows 8 tablets thus far. We reiterate our position that investors need to see real traction of the Windows 8 ecosystem before the stock will move meaningfully; we maintain our Equal Weight rating. We believe the pricing leaves an opportunity for Microsoft OEM partners to potentially succeed with their respective tablet strategies, as the Surface pricing is not significantly cheaper compared to announced pricing for other Windows 8-based tablets. The OEM partners which have announced designs for Windows RT tablets include Asus, Dell, Lenovo, and Samsung. Additionally, remember that Surface running Windows 8 Pro, on Intel chips, will only be available in early 2013 and will likely be priced significantly higher than the Windows RT version. The Windows 8 Pro version of Surface is the model we could envision having traction within enterprises, as supporting an ARM-based architecture on a tablet likely would present challenges for large organizations.
Lenschow’s colleague, Ben Reitzes, reiterates an Overweight rating on Apple shares this afternoon, writes that Apple needs the event to deflect attention from surface, and also to boost iPad sales that were likely flat last quarter:
For the just ended September quarter, we believe new iPad sales decelerated q/q, as consumers awaited the new iPad mini. We estimate iPad unit sales will be essentially flat q/q with 17 million units in sales for the September quarter � and are not expecting upside. In fact, we believe that lower-end iPad 2 sales likely exceeded expectations at the expense of the higher end given success in corporate markets. We believe that more upside could be in store for Apple in FY13 but still expect a conservative outlook for F1Q13 (December) on the October 25th EPS report given potential production constraints in many products. For FY13, we currently estimate that Apple will grow iPad units 39.8% y/y to 85.7 million, but the mini is not included in this estimate yet. We believe a new form factor would lend upside to estimates and be largely incremental to the category � with up to $6 in potential incremental EPS power over time.
Apple shares this afternoon are up $14.95, or 2.4%, at $649.71, while Microsoft stock is off a penny at $29.50.
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