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Microsoft's Surface Clan Widens

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Microsoft Corp. (MSFT - Free Report) recently announced that it has expanded its Surface family of tablets.

The company has unveiled two powerful Surface models — Surface 2 and Surface Pro 2.These models will be available at Microsoft retail stores and third-party retailers in 22 markets. While it will be available in 21 markets, including the United Kingdom, the United States and Germany, from Oct 22, it will reach the Chinese market by early November.

The new consumer-focused Surface 2, the successor to the Surface RT, is slightly thinner and lighter. It has a 10.6 inch screen with increased camera resolution. The model has a USB 3.0 port which allows up to four times faster file transfers.

Priced at $449, Surface 2 will be available in 32GB and 64GB memory sizes and is built on Nvidia Corp’s (NVDA - Free Report) chip designed by ARM Holdings . In addition, the tablet comes preloaded with a stripped-down version of Office, including Outlook.

The new Surface Pro 2 is aimed at the new generation of lightweight laptops called "ultrabooks," built on the new Haswell chip from Intel Corp. (INTC - Free Report) . This tablet is 20% faster and has 75% more battery life than the earlier released Surface Pro.

Priced at $899, Surface Pro 2 will be available in 64GB and 128GB memory sizes. Though the device supports the full, standard version of Office, it will have be bought separately. 

Microsoft is clearly targeting the premium segment with its devices, pricing them slightly lower than Apple devices with comparable specs. But Apple devices are already popular and have significant mindshare, so Microsoft may not be able to pull away Apple fans. Its only advantage is Office, which may soon be available for iOS as well.

Microsoft’s initiative to increase its share in the tablet market comes in the wake of declining desktop and laptop sales due to strong demand for smartphones and tablets. Microsoft first launched its Surface tablets worldwide on Oct 26, 2012, but the sales did not gain momentum.

According to IDC, only 300,000 Surface tablets were sold during the second quarter of 2013, down from 900,000 sold during the first quarter, which cost Microsoft its position as one of the top five tablet makers. In comparison, Apple (AAPL - Free Report) led the race with a 32.4% share of the worldwide tablet market, followed by Samsung, ASUS, Lenovo and Acer with a market share of 18.0%, 4.5%, 3.3% and 3.1%, respectively.

The addition of the new and improved Surface tablets is the company’s latest effort to increase its share in the tablet market. In June, the price for the Surface RT model was slashed to $199 from $499 for schools purchasing directly from Microsoft. In December last year, the company added more retail outlets from where its tablet could be sold.

Microsoft also transformed several holiday stores into permanent Microsoft retail outlets. Most recently, it tied up with Best Buy (BBY - Free Report) to create Windows Stores within Best Buy stores.

Although Microsoft has fallen back in the tablet race, it may still be able to create its own niche. Combining the functionality of a tablet and laptop, Surface can gradually create interest and attract new users.

Currently, Microsoft has a Zacks Rank #3 (Hold).

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