Microsoft Set to Launch $399 Surface Go, Ups Ante in EdTech

Microsoft (MSFT) is coming up with Surface Go tablet series starting at $399, in a bid to gain a competitive edge in the low-priced tablet market.

In a bid to explore the low-priced tablet market, Microsoft MSFT is set to introduce Surface Go tablet. The news came as no surprise since the development rumors have been doing rounds since May following a Bloomberg revelation.

The tech giant equipped with cutting-edge capabilities acquired both organically and inorganically, is putting its best foot forward in the EdTech space. In fact, the company is exploring newer avenues buoyed by strengthened capabilities. We believe the new product will help the company gain market share, going forward.

This move is believed to be the company’s attempt to take on Apple’s AAPL budget iPads,and Alphabet’s GOOGL lower-priced Chromebook

Notably, shares of Microsoft have gained 48.4% in the past year, substantially outperforming the industry’s rally of 35.6%. This outperformance can primarily be attributed to its continuous efforts in strengthening artificial intelligence (“AI”) and Internet of Things (“IoT”) based capabilities. Undisturbed focus on Azure continues to remain a key catalyst.

Product Specifications

The new Surface Go features a 10-inch screen and weighs 1.15 pounds, lighter than its prevailing Surface counterparts. The latest series is equipped with Intel’s INTC processor and graphic chips.

We may note that both Acer Chromebook Tab 10 and the current cheapest version of Apple iPad have 9.7-inch specification.

The different variants of the new tablet series come with storage capacity of 64 GB, 128 GB and 256 GB with 4 GB or 8 GB RAM. Few of the models will also have features to connect with LTE cellular networks. Prices will range between $399 and around $549, according to the specifications.

Notably, the new product has a decent 9 hour battery life and is compatible with the USB-C charging standard. The new tablet will function with optional keyboard and mouse, similar to existing Surface products.

We believe with the low-price tag, the company has tried to optimize the quality accordingly. In doing so, the new product will feature Windows Hello facial recognition option for logging-in and Windows 10 S mode, thereby making it a considerable option.

Pricing & Availability

Pricing remains the primary concern for Microsoft, as often its devices have fallen behind not only to the iPad but Chromebooks as well due to this issue. Both its rivals have introduced tablets, with prices starting at $329, targeted at the low-end education market. Apple priced its iPad lower at $299, targeting schools to attract more students. To counter these developments and make its presence felt in this space, Microsoft is targeting the $400 price point.

With this move, Microsoft anticipates to add sheen to its Surface business. The company’s $499 Surface 3 tablet released in 2015 went kaput in the very next year. Moreover, the company made an attempt in this direction in 2012 by launching a series of laptop-tablet hybrid devices — Surface RT — with a starting price of $499. Even then, it failed to grab customer attention owing to certain flaws.

Microsoft’s new Surface Go is a $400 improvement over the existing Surface Pro tablet priced at $799. The pricing will remain a key factor in the product’s popularity in the EdTech market given that affordable quality devices are alluring to technologically inclined students.

Per TechCruch, the new product is anticipated to hit the shelves on Aug 6, while CNBC and Bloomberg maintain Aug 2 as the launch date. Surface Go will be available with Wi-Fi connectivity and cellular versions will be introduced later.

Intensifying Competition

The tech stalwarts are leaving no stone unturned to lure schools, students with their affordable and quality products. With the new Suface Go tablet, we believe Microsoft is exploring the entirety of education technology market.

The vivid professional features, for instance, a detachable keyboard, distinguish it from the entry-level iPad. Microsoft’s Surface revenues surged 32% (27% at cc) in the third-quarter fiscal 2018 on a year-over-year basis. The business has generated $4.4 billion in revenues in the past four quarters, per Bloomberg.

Meanwhile, Apple accounted $20 billion worth sales of iPads in the trailing four months, remaining the dominant name in the tablet market.

We believe the launch of the new product holds promise. Given the billion dollar difference in the tablet revenues, Microsoft is anticipated to gain market share even if being a dominant name seems to be idealistic, as of now.

To Conclude

Microsoft is trying to fortify its presence in the EdTech market by driving innovation in both hardware and software categories.

The company acquired Flipgrid in the past month to counter Google’s Classroom app, and other players in the arena. In a bid to further expand customer base, Microsoft is making the app free of cost for schools.

Microsoft is active in the higher education market as well. The company focuses on developing software expertise among youth which enables them to build and enhance their professional career.

Notably, Github buyout will enable the company to enrich its machine learning base further, and improvise the professional programs accordingly, among other aspects. The company conducts various professional courses across EdX, Coursera, among others.

Now with the new Surface Go, Microsoft aims to strengthen its core competency in the low-end personal computing market, which augurs well in the longer haul.

Zacks Rank

Currently, Microsoft carriesa Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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