Microsoft turns on
Hardware makers bristled when Microsoft (MSFT) introduced its Surface line of computers in 2012. The Redmond software giant seemed to be biting the hand that fed it.
At the Consumer Electronics Show this year, Microsoft’s long-range plan came to light. Lenovo announced a game-changing Surface-like computer with constant connectivity and long battery life.
The future of mobile computing is not smartphones. It is ACPCs – always-connected PCs. And they run Microsoft software.
In 2009, iPhone changed everything. Its touchscreen, ease of use, and constant connectivity were liberating. Almost a decade later, screens are larger and software more intuitive -- but let's be honest, actual computing is still much more comfortable on a desktop or laptop.
chart courtesy StockCharts.com
There is a good reason for that. Microsoft controls the productivity software people want. Office is a robust ecosystem with broad network effects. Good luck exchanging files if you are not running Word or Excel. To make matters worse, Microsoft has been unwilling to duplicate the most compelling features on smartphones.
The Lenovo Miix 360 is a crazy thin and light 2-in-1. The tablet/PC hybrid is ARM-based, promises 20 hours of battery life, and can surf the Internet at speeds greater than most home WiFi connections, thanks to always-on LTE. Better still, it runs the entire Windows software stack, past and present. For most computer users, it is the best of all worlds.
It eliminates worries about battery life, connectivity, and compatibility. It is not the first time down this road for Microsoft. The original Surface RT, an ARM-based 2-in-1, was a $900 million flop. The machines were underpowered and unloved by developers and hardware partners. This time, Microsoft put in the hard work. The new Windows S software works. And Hewlett Packard (HPQ), Asus and others have announced new machines coming before the end of the year.
Two years ago Apple reimagined the computer with the iPad Pro. The big idea was corporate users would flock to the bigger form factor because they loved their iPhones. Beefed-up second-generation Surface computers were also selling very well. The 2-in-1 format became a legitimate category with widespread demand.
The latest course change at Microsoft leverages Surface’s compatibility strengths, and adds always-on connectivity and better battery life, thanks to ARM-based architecture and mobile system-on-a-chip processors. At 20 hours, ACPC’s will achieve battery life 50% greater than iPad Pros.
It’s ironic. As Apple is embracing Intel (INTC) and moving away from Qualcomm(QCOM) silicon, Microsoft is going the other way.
That is why ACPC is so important. It could help Microsoft make a surprise takeover of mind share in mobile computing software, with a legitimate competitive advantage.
Microsoft stock has been shooting higher after an important upside breakout at $85. That level is now support. It's a buy for those of you who like large-tech on pullbacks; I'm on the lookout for a spot.
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