Will HP Inc Finally Kill Microsoft Corporation’s Surface Pro 4? – Motley Fool
Over the past few years, Hewlett-Packard has started to consider Microsoft (NASDAQ:MSFT) a dangerous rival instead of a helpful partner. That’s because Microsoft started selling Surface 2-in-1 devices to compete against HP’s core laptop and tablet businesses. After a rough start, the Surface gained momentum and sparked a form factor revolution across the PC market over the past three years.
HP challenged the Surface repeatedly with hybrid devices like the Envy x2, Spectre x2, Pro x2, and Elite x2, but most of those devices sank in the saturated market of Windows 2-in-1 devices. In HP’s final quarter as a single company, PC sales fell 13% annually, with double-digit declines in desktops and workstations. Sales of notebooks, which include those hybrid devices, fell 8%.
But HP isn’t giving up. After splitting from its enterprise business, the new HP Inc (NYSE:HPQ) unveiled the Elite x2 1012 to challenge the Surface Pro 4. But will HP’s latest “Surface killer” fare any better than its predecessors?
By the numbers: HP Elite x2 vs Surface Pro 4
The base models of the Elite x2 1012 and Surface Pro 4 both cost $899. However, the Elite’s base model includes a travel keyboard and an Active Pen stylus. The Surface Pro 4 comes with the Surface Pen, but the keyboard must be purchased separately. As for the other specs, the Surface Pro 4 has a higher resolution display and supports beefier i5 and i7 processors.
But the Elite x2 also has several advantages over the Surface Pro 4. The Elite x2 is crafted from a single piece of aluminum, while the Surface Pro 4 and other 2-in-1 manufacturers are made from molds or stamped metal. The Elite x2 has easily removable parts which can be repaired on-site, while the Surface Pro 4 has to be sent off-site to be serviced.
Unlike the Surface Pro 4, the Elite x2 has an optional smartcard reader keyboard for vertical market industries like the federal government and energy companies. The Elite x2 offers an LTE wireless connectivity option, which the Surface Pro 4 lacks, for $100 more. The Elite x2’s Core M processors also feature vPro technology, which the Surface Pro 4’s processors notably lack. vPro tech enables a wider range of security features across the BIOS and biometric scanners, and is considered more manageable in IT environments.
How this fits into HP’s business
HP is clearly aiming the Elite x2 at enterprise customers, which tend to upgrade their PCs in large bulk orders. Since replacing all aging PCs with iOS or Android tablets can be impractical due to compatibility issues with legacy software, companies are often more inclined to buy Windows 2-in-1 devices to “bridge the gap” between PCs and tablets.
Research firm IDC expects global shipments of tablets to fall 8% annually this year as 2-in-1 shipments surge 86.5%. IDC notes that 2-in-1 devices have struggled in the past due to high prices, unappealing designs, and a distaste for Windows 8. But as more competitors enter the market, prices have declined, and designs have improved. Windows 10 also arguably offers a better 2-in-1 experience than its predecessors.
HP’s Elite x2 1012 is a formidable device, but Microsoft can still leverage its brand, enterprise software presence, and existing partnerships to sell the Surface Pro 4 to big businesses. It’s unclear how much of the Windows 2-in-1 market Microsoft controls, but research firm Strategy Analytics recently stated that the Surface Pro 3 and Surface 3 will boost Windows’ overall share of the tablet market to 10% by the end of the year.
A growing but crowded market
IDC estimates that over 40 different vendors shipped 2-in-1 products in the second quarter of 2015, up from just 14 vendors two years ago. That competition caused Microsoft’s Surface revenue to fall 26% annually in its most recent quarter. But that decline can be considered a mixed blessing for Microsoft, since it means that other OEMs are now shouldering the risks in expanding its Windows 10 ecosystem.
Looking ahead, HP should probably worry more about larger hardware makers like Lenovo and Dell instead of focusing on the Surface Pro. As its rivals flood the market with new 2-in-1 devices, HP’s new Elite x2 could struggle to make a lasting impression on enterprise customers.
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