What You might have missed: Week of August 4th, 2017

Tablet 2Q17 Sales see Strong Huawei Growth

According to a report published this week by Strategy Analytics, global tablet shipments dropped 7% year-on-year reaching 43.8 million units.

Huawei showed the strongest growth with shipments reaching 3.2 million units up 42% over the same period last year. While these are very encouraging numbers they are also sales into the channel which means that they are not necessarily sold to final customers yet. As Huawei is still building a presence in the channel I would not be surprised to see some of this volume being inventory. The star of Huawei’s portfolio is the MediaPad 3 focused on music and millennials, it is priced very aggressively. It will be interesting to see how Huawei will balance the desire for volume that this kind of product can bring vs. the new line of PCs running Windows that the Chinese manufacturer has been focusing on of late. Other players such as Lenovo have already shifted their focus more to 2in1s running Windows as the Android opportunity was turning into a race to the bottom for both prices and profits.

The other success story during the quarter was Apple. iPad shipments grew 15%. During Apple’s earnings call on Tuesday, Tim Cook specifically mentioned education as a segment that helped iPad sales.  He called out Saint Paul Public Schools district in Minnesota, which deployed 40,000 iPads for its 1:1 program and the Shawnee Mission School District outside Kansas City, which bought 19,000 iPads.

Cook also added that the new Swift Playground app and the coding tools available are getting students excited. He said: “We’re thrilled that over 1.2 million students of all ages are now using iPad and Swift Playgrounds to learn the fundamentals of coding, and over 1,000 K-12 schools across the United States plan to use Apple’s ‘Everyone Can Code’ in their curricula this fall.”

While some pointed out that the new cheaper 9.7” iPad was largely to thank for the growth in sales, the average selling price tells a different story. Average ASP remained, in fact, was flat at $435. This would indicate that even if the new 9.7” model was popular, Apple sold enough of the new 10.5” and 12” iPad Pro models to favorably impact pricing.

Back to school will be a very interesting time to check if iPad Pro models can replace the MacBook Air for college students. The competition will be particularly hot this year as Microsoft added Surface Laptop to its lineup.

Amazon’s Fire sales continue to suffer from the lack of international appeal and I do not see this changing any time soon. “Others” is also in decline, as Android is no longer seen as a viable option. Like in the wearable market, Android is a race to the bottom, a game most PC vendors are just not interested in playing.

Surface Plus

This week, Microsoft announced Surface Plus and Surface Plus for Business, a new leasing program to open the opportunity to own a Surface to a larger audience. Surface Plus is available in the US only either through Microsoft.com or at the Microsoft Stores and it comes just in time for back to school.

Surface Plus offers:

  • Low monthly payments: Customers can purchase a Surface device with an easy, 24-month payment plan at 0% APR.1
  • Device upgrades: Customers can upgrade to the latest Surface after just 18 months.2
  • Dedicated Service & Support: Surface Plus offers best in class service and support from Microsoft Stores. Customers also have the option to add the Microsoft Complete extended service plan.
  • Microsoft Store benefits: All customers who shop at Microsoft Store enjoy access to benefits like a 30-day hassle free return policy, a Surface training and health check as well as a year of free in-store support and technical assistance.

PC as a service is certainly not new, but other PC manufacturers have mostly focused on businesses, not consumers. I mentioned in my Wednesday column that more could be done to drive buzz around the stores to show off the Surface portfolio. While I do not think price has been the key hurdle for Surface, the leasing option will certainly help especially with the 18-month upgrade. This move in the consumer market is perfectly timed as more and more smartphone buyers are choosing leasing options with regular upgrades. Their level of confidence, therefore, in leasing vs buying technology is growing. This is not of course for consumers who have been hanging on to their five-year-old PC but for consumers who want to future-proof their computing experience. I see this targeting the early mainstream segment. A segment that we see as tech savvy users with some disposable income limitations is a sizable chunk, representing between 15 to 20 percent of the overall CE consumer market.

For small and medium enterprises, Surface Plus for Business replaces the Surface membership and offers:

  • Multiple Surface models: Customers can add as many devices as they want into a single agreement and can have a mix of models across the Surface portfolio. This includes the Surface Studio, Surface Hub, and Surface Laptop
  • The latest devices: Previously unavailable, customers can now finance a 55” Surface Hub in addition to the new Surface Pro, Surface Laptop, Surface Book, and Surface Studio to unlock the power of the group in their businesses.
  • Office 365 for Business:. For an additional $8.25 per user per month, businesses can enjoy the ultimate productivity experience on Surface.
  • Flexible Terms3. Businesses can choose flexible 18, 24 or 30 month periods, with the ability to upgrade devices after just 12 months on the 18-month term (or after 18 months on the 24-month term). Businesses can also expand or reduce their device fleet mid-term.*
  • Device Protection: Surface Plus for Business offers peace of mind with the Microsoft Complete for Business extended service plan with accidental damage protection.

This is available for customers in the U.S. via a store or online

Strengthening their PC as a service offering adds, even more, credibility to Microsoft as an enterprise supplier. I see the addition of Surface Hub, in particular, to be very appealing to enterprises especially as millennials and their highly collaborative working practices move into the workplace.

Published by

Carolina Milanesi

Carolina is a Principal Analyst at Creative Strategies, Inc, a market intelligence and strategy consulting firm based in Silicon Valley and recognized as one of the premier sources of quantitative and qualitative research and insights in tech. At Creative Strategies, Carolina focuses on consumer tech across the board. From hardware to services, she analyzes today to help predict and shape tomorrow. In her prior role as Chief of Research at Kantar Worldpanel ComTech, she drove thought leadership research by marrying her deep understanding of global market dynamics with the wealth of data coming from ComTech’s longitudinal studies on smartphones and tablets. Prior to her ComTech role, Carolina spent 14 years at Gartner, most recently as their Consumer Devices Research VP and Agenda Manager. In this role, she led the forecast and market share teams on smartphones, tablets, and PCs. She spent most of her time advising clients from VC firms, to technology providers, to traditional enterprise clients. Carolina is often quoted as an industry expert and commentator in publications such as The Financial Times, Bloomberg, The New York Times and The Wall Street Journal. She regularly appears on BBC, Bloomberg TV, Fox, NBC News and other networks. Her Twitter account was recently listed in the “101 accounts to follow to make Twitter more interesting” by Wired Italy.

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