Apple and Microsoft – Silver linings.

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The iPad Plus could help Microsoft more than it hinders it.

• Apple’s launch of the iPad Plus might just create the user excitement that Microsoft seems unable to create for itself.
• Apple looks set to launch the iPad plus towards the end of this year or early in 2016E.
• This will be a 12” device with a very large battery equipped with technology that is capable of sensing the pressure exerted when the screen is touched.
• This technology is used on the Apple Watch but on a tablet it enables a much more interesting use case to come to life which is the use of a stylus.
• Including pressure sensitivity allows a tablet to offer a far more realistic pen-based experience and opens the iPad to many use more cases including coming closer to a laptop replacement.
• The inclusion or support of a stylus on the iPad Plus is looking increasingly likely.
• The iPad Plus will still be running iOS, but adding all this up leaves the specification of the iPad Plus looking more and more like the Surface 3 and Surface Pro 3.
• This might be a nightmare for the hardware business inside Microsoft, but I suspect there is a silver lining.
• I am certain that one of the first developers to ensure its apps. are upgraded to take full advantage of these new features will be Microsoft.
• With the basic versions of Office 365 being free on iOS and Android there is no reason to use anything else and the iPad Plus will be a better hardware specification on which to use Office.
• This could have a positive effect on Microsoft’s presence on the iPad and support the growth of Office 365 which RFM calculates is one of Microsoft’s most important profit drivers in the long term.
• Furthermore, this device may begin to make users understand that a tablet form factor (with a keyboard, mouse and sometimes a stylus) offers a vastly better computing experience than a laptop.
• Microsoft and Intel have been incapable of creating any real user interest around this form factor and instead have concentrated on selling them as laptops lookalikes.
• Hence, it is quite possible that Apple’s product will kick-start the much needed laptop replacement cycle as users realise that there is a much better, much healthier option available for portable computing.
• The risk, of course, is that Apple steals a significant slice of market share from Microsoft but the fact that the iPad Plus is using iOS is likely to keep Microsoft safe.
• iOS devices are not capable of offering a full laptop experience and the majority of users that don’t need this level of performance have already deserted the laptop in favour of a smartphone or a tablet.
• Hence I think it unlikely that the iPad Plus will be enough for the remaining users to switch but it may be enough to get them thinking about what else is on offer.
• This will lead them to the Surface as well as other similar products which I am hopeful will be in the market by the beginning of 2016E.
• Hence, I don’t see the iPad Plus as a negative for Microsoft.
• In fact it could well be the catalyst that kick-starts a replacement cycle that benefits Microsoft that it has incapable of doing for itself.
• Microsoft remains one of my top choices in the ecosystem where I think that the shares are worth around $61 even if it does a poor job on the ecosystem.