This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

It May Be Time For Microsoft To Cancel Surface RT

Stocks in this article: AAPL AMD ARMH INTC MSFT NVDA

Chris Lau, Kapitall Wire: Samsung took a shot at Microsoft (MSFT) by saying that mobile devices based on Windows are not selling very well. He said

Smartphones and tablets based on Microsoft's Windows operating system aren't selling very well. There is a preference in the market for Android. In Europe, we're also seeing lackluster demand for Windows-based products.

[Related Tech:  3 Stocks to Watch after Samsung Releases Galaxy S4]

Microsoft did in fact sell around 1.5 million Surface tablets since launching last year, split between 1 million RT tablets and around 400,000 Surface Pro sales. Investors should note that the Pro was not released until last month. The Pro is also very highly priced, was released in limited quantities, and received lackluster reviews. Total unit sales are well-below initial expectations (there were 3 million shipped), but Microsoft is late in entering the tablet market.

Late could probably be better than never. Apple (AAPL) leads in market share with its iPad, but found the need to release a mini iPad to retain market share.

Analysis

Microsoft’s shares reflect the limited upside in growing in the mobile space. Dividends are supported by continually strong sales of Office productivity and server software. For shares to command a higher price-earnings multiple, Microsoft needs to prove its relevance in mobile devices.

Cancelling RT and Focusing on Pro

To achieve this seemingly uphill battle, Microsoft might need to do away with RT. Initial sales of the RT are weak, while the Pro appears to have sold at a more rapid rate. Consumers do not want a scaled-down tablet running on an ARM-based (ARMH) processor.  The opinion of cancelling RT is not unique: IDC mentioned this notion too. The RT Tablet is also powered by NVIDIA (NVDA).

The scaled-down operating system appears to weaken the tablet’s strengths: the ability to run x86-based Windows software. Microsoft may have believed that it needed a lower-priced device to compete in the market place. Canceling RT and going “all-in” with Pro would restore Microsoft’s relationship with Intel (INTC). The focus would also bring leadership to hardware manufacturers in building Windows 8-based solutions.

Company Comparison

Using Kapitall’s Compar-o-matic tool, investors may compare the above-mentioned companies. The most appropriate metric to use is the POP or Price of Profit. Including AMD (AMD) in the mix, Microsoft and Apple are deeply undervalued by investors (press “play” to view POP changes in AMD over time):

Click through for more free tools. 

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,164.95 -251.90 -1.45%
S&P 500 1,994.99 -26.26 -1.30%
NASDAQ 4,635.24 -48.1670 -1.03%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs