The new Surface 3 is thin (8.7 mm), lightweight (1.37 pounds) and should be easier to maneuver as a tablet than its very slightly beefier big brother, the Surface Pro 3. The new device has 10.8-inch touchscreen (compared to the Pro's 12-inch display), a quad-core Intel (INTC) Atom x7 "System-On-a-Chip processor and a starting price of $499.
"Surface Pro 3 has carved out a solid niche as a premium tablet/laptop hybrid, but with the new Surface the company targets similar price points to the Apple (AAPL) iPad," said Ed Maguire, senior analyst and managing director at investment bank CLSA. He said the new tablet could be a welcome addition to the Microsoft stable. "This is an opportunity to capture a broader segment of buyers that would otherwise choose between a laptop or tablet in the same price range."
Shares of Microsoft were down 0.22% to $40.87 in mid-afternoon trading in New York.
To assure customers that this is not a lesser device, like the ones which ran on the ill-fated Windows RT operating system, Microsoft's public relations machine has gone into high gear to make sure everyone knows this is a real Windows computer: "Surface's vision has always been to empower people to get things done, and Surface 3 contributes to that mission -- it's the best of a tablet, yet works like laptop."
"The Surface product line remains a key ingredient in Microsoft's recipe for success and they needed to deliver a lighter/less expensive version to expand customer adoption" said Daniel Ives, analyst with FBR Capital Markets. , "The sweet spot continues to be on the lower end of the market,"Ives said, "and at this point Microsoft and [CEO Satya] Nadella need to aggressively court customers towards the Surface product line as it lays the groundwork for future success."
Ives said this won't be easy. "This remains an uphill battle on the tablet front, although this looks like Microsoft's best shot to gain incremental share and become a legitimate player in this key market."
The new Surface 3 will ship with a full 64-bit version of Windows 8.1 and is eligible for a free upgrade to Windows 10 when it is released to the public later this year. Surface 3 will also include a free one-year subscription to Office 365 Personal, including full versions of Microsoft Word, Excel, PowerPoint, Outlook and OneNote plus 1 TB of OneDrive cloud storage.
The new, smaller design has a 3.5 megapixel front-facing camera and an 8 MP shooter on the back. Both are capable of capturing 1080p high-definition video. There's also a full-sized USB 3 port, a Mini-Display port and, thankfully, a microUSB port for both connectivity and battery charging. No more wasted time to attach the magnetic charging connection.
Among the features it shares with previous Surface devices is a kickstand which allows use of the tablet as a stand-up monitor. In this case, it's a 3 position kickstand. There are also new, smaller Type Covers to allow you to use the Surface as a laptop, and there's a new docking station designed especially for this device. Surface Pens now come in four colors.
Microsoft plans to offer the Surface 3 in Wi-fi only and Wi-fi/4G/LTE versions when the device is officially released in the first week of May. T-Mobile (TMUS) and Verizon (VZ) have already been lined-up as resale partners.
"This new device is a win for Intel," said Canaccord analyst Matt Ramsay, but he called it "a win on the margin." Ramsay explained that having Intel processors in the new Surface "is fairly minor" compared to the recent decline of its PC and server chip sales." But, he added, Intel also wants to sell manufacturers more of its LTE chips and thinks "this could help."