Morgan Stanley revises tablet forecast way up, says Windows 8 has big opportunity

by David Needle

June 1 2012

Investment banking firm Morgan Stanley released an in-depth forecast of the tablet market back in February, 2011, but now it’s revised that report due to much faster growth than expected.

Tablet shipments in the past two years have actually proved to be 20% higher than Morgan Stanley’s estimate early last year. 

More significantly, the company’s latest “Blue Paper” report to clients on the tablet industry includes a survey of “purchase intentions” that led the firm to update its forecast of tablet shipments much higher. Now the company says it expects 133 million and 216 million tablets will be shipped in 2012 and 2013 respectively -  57% and 122% higher than the original estimates. 

And while the iPad is largely driving the market as the most dominant player, Morgan Stanley says it now believes Microsoft has moved from “a challenged to a best-positioned company in the tablet market.” 

But unlike the hard sales numbers available for iPad and Android tablets, the Microsoft forecast is all conjecture at this point, based on the expected acceptance of Windows 8 tablets due out later this year. Morgan Stanley believes Microsoft’s ace in the hole will be the bundling of Office with Windows 8 tablets. 

“Our survey suggests 25% of users expect to buy Windows 8 tablet and Office is a key feature, especially for those considering their first tablet purchase,” the report says. 

The Blue Paper also notes Android tablets have got a “mixed” reception so far and Microsoft tablets have a chance to grab second place from Android behind the iPad, which currently has 62% of the market. 

Windows 8 tablet pricing will be a major factor

Rumors abound that Google will soon introduce a low cost, 7-inch tablet, likely priced at $199 to compete directly with Amazon’s Kindle Fire. But the Morgan Stanley report indicates Windows 8 tablets will have a tougher time competing directly at the same starting price as the newest iPad of $499. 

The maximum price those responding to the survey said they’d be willing to pay for a Windows 8 tablet with Office included is $469. 

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  • autotraveler
    2 years 5 months ago

    David, I'm about to post a comment on today's jailbreaking thread, referring back to my points here.

    Morgan Stanley's report says that the most people will pay for a Win 8 tablet is $469, I don't know what they are smoking. At $469, consumers will spend less for an iPad 2 or spend $30 more for the New iPad.

    I don't think $399 will cut it, even with Office installed. Apple has too much of a head start, especially with their App Store. All it will take is an Open Office open source-style app to run a Windows-friendly office suite on the iPad and all this becomes a non issue. And what if Apple lets Windows files open easily within its own productivity program? End of story.

  • David Needle
    2 years 5 months ago
    Thanks for the thoughtful comments Richard. Right, that in fact was what Morgan Stanley's report was saying, Windows 8 tablets have to come in cheaper than the iPad to compete. Their own survey results show the maximum price buyers said they’d be "willing to pay" for a Windows 8 tablet with Office included is $469. I'm more inclined to think your estimate of a $399 price is needed for Windows 8 tablets to have a chance. Apple still has an ace up its sleeve with the iPad 2 at $399, but if the Windows 8 tabs include Office, offer a better display and other distinct features, they have a good chance of attracting buyers.
  • autotraveler
    2 years 5 months ago

    After the Facebook debacle, why would anyone with an ounce of sense believe any tech-related analysis coming from Morgan Stanley?

    If Windows 8 tablets are going to be priced HIGHER than iPad tablets with the same spec, then Windows 8 tablets will be dead in the water as Microsoft is playing catch up from way far behind. (The 25% market share in the pie chart? Wishful thinking.) To get traction in the marketplace, Windows 8 tablets will have to be priced LESS than an iPad with the same processing power, memory, and connectivity (WiFi or 3G/4G). Otherwise Windows 8 tablets are going nowhere.

    Hasn't anyone at Microsoft (and Morgan Stanley) learned anything from what's happened with Motorola, HP, and RIM? These companies came into the market with Android tablets priced the same, or in some instances higher, than a comparable iPad, and we've all seen the markdowns that has been the result.

    Then throw in the fact that it seems Google is finally getting serious about bringing the battle to Apple, where does that leave Microsoft? Are they delusional?

    My prediction? Unless the 16GB Windows 8 tablet starts at $399 or less, with Office included (maybe a lite version of Office will suffice), then a Windows 8 tablet is a non-starter. A $399 tablet (which hasn't really worked for the Android supporters as Apple still retains a dominant market share more than two years into the game) with Office functionality, MIGHT gain a small foothold in the marketplace. Otherwise consumers will simply stick with what works and that's the iPad. That's a proven fact especially with the huge lead in the marketplace it now enjoys. (I am not an Apple fanboy, more than anything I wanted Android to mount a serious challenge to the iPad. Thus far it hasn't given Apple's huge lead in the marketplace.)

    And don't think Apple will stand still. They could pull an Open Office-style end run, providing full Office capability within iOS. Where would that leave Microsoft with the huge installed base of iPads already in the marketplace? Nowhere.

    This all has epic fail written all over it. We all saw what happened to HP, right? Tablets that could ALMOST go head-to-head with the iPad ending up selling for $99. (They probably could have sold them almost as quickly at $199 and only lost half as much. I'm betting that's what Meg Whitman would have done had she been in charge at HP at the time they blew out the TouchPad.)

    He who gets to market with a 9-inch tablet for $199 that does 90% of what the $399 iPad 2 does, is the winner. Who gets there first? Most likely Google/Motorola, possibly Amazon. That's what the market is waiting for. $199 is the magic number at retail, the Kindle Fire proved that. Now, when will someone introduce a name brand 9-inch tablet at that price that will work?

    The pie chart you see in this article? It's pie in the sky.

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