First Click: Apple, the Microsoft benchmark

October 7th, 2015

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Microsoft wasn’t shy in calling out Apple during the launch of its Surface Pro 4 and Surface Book. Twice during yesterday’s event, Microsoft projected competing Apple products onto the giant screen that loomed over the world’s press. First to show that the Surface Pro 4 is 50 percent faster than MacBook Air, and then later to show how the Surface Book is two times faster than the MacBook Pro. An odd decision when you consider that Apple is responsible for just eight of every 100 computers shipped globally, according to IDC. So why make Apple the comparison benchmark?

First, Apple’s an emotive target. Apple vs. Microsoft is the stuff of legend, a rivalry ranking up there with Coke vs. Pepsi, Edison vs. Tesla, and your parents vs. technology. It’s fun to play for a team, even if the passions have cooled from the glory days of Jobs vs. Gates.

Second, the MacBook, the Air especially, is often at the top of professional reviewer recommendations for the best overall laptop. And while Macs are capable of running Windows 10, they aren’t Windows PCs per se. Redmond has enough difficulties convincing OEMs that it’s not trying to steal their scant profits without competing with them directly on stage.

Third, money. While Apple’s Mac unit sales are meager compared to PCs, it commanded more than half of industry profits last year, according to Bernstein Research. That’s up from about 45 percent in 2012, according to research from Horace Dediu of Asymco. Apple’s making 25-30 percent margins on each unit sold compared just 2-3 percent for PCs. Therein lies Microsoft’s opportunity with its own version of the Apple tax: the Surface premium.

Arguably, only Microsoft has the clout and motivation to fill the premium PC void relinquished by its OEMs. Despite the company abandoning Ballmer’s devices-and-services strategy, Microsoft continues to crank out imaginative, lust-worthy hardware even as its biggest partners seem content to mimic Apple. Panos is certainly pumped, and even the curmudgeonly Vlad Savov is impressed by Microsoft’s new Surface lineup. That’s a good start towards Microsoft’s goal of making Windows PCs something people want to use, not use because their IT departments leave them no choice. "We’re moving people from needing to choosing to loving Windows" said Microsoft CEO Satya Nadella. "These devices promise to fuel even more enthusiasm and opportunity for the entire Windows ecosystem."

Surface has evolved into a $3.5 billion a year business in three years. Both Dell and HP now resell it to their business customers and its success has had the knock-on effect of doubling 2-in-1 sales across the Microsoft ecosystem, according to Terry Myerson at the event yesterday. In other words, Myerson is positioning Surface as a net gain for Microsoft’s long-time Windows partners.

That might be true in the short term. Maybe the success of Microsoft’s premium devices will also help OEMs raise their profit margins a few points. But in the long term, does Microsoft need its PC partners at all?

Microsoft loved taking shot after shot at Apple yesterday. Just remember, the opposite of love isn’t hate, it’s apathy, and Microsoft all but ignored its PC makers at the Surface launch.

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