Microsoft to Apple: We are Making Final Preparations to Enter the Tablet War

With the holiday season fast approaching, companies are gearing up for new product launches. Considering the PC industry is in a historic decline and tablets are becoming an increasingly popular gift, Microsoft (NASDAQ:MSFT) is making a big bet on the fourth quarter.

The old software giant is the new kid on the block when it comes to tablets. Later this month, Microsoft will start selling its line of Surface tablets. Although Compaq introduced a tablet PC prototype with a Windows OS more than a decade ago, Microsoft has failed to capture an audience in the Apple (NASDAQ:AAPL) dominated industry. It hopes to change that with its Surface offering.

Component suppliers in Asia are indicating that Microsoft is feeling confident about its homemade tablet. According to the Wall Street Journal and people familiar with the situation, Microsoft has placed orders to produce 3 million to 5 million Surface tablets in the fourth quarter. The suppliers note that this is similar to orders that were placed for Amazon’s (NASDAQ:AMZN) popular Kindle Fire tablets and Google’s (NASDAQ:GOOG) Nexus 7 tablets. However, the sources also say that they have received orders to produce more than 10 million units of a smaller iPad. Mass production began on the Surface tablets earlier this month, and will be available on October 26.

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There has been a slew of new tablet announcements from many companies recently, including the new Nook HD from Barnes & Noble (NYSE:BKS), but the question always comes back to if competitors can attract enough market share away from Apple to make it worthwhile. Companies such as Amazon have experienced large success by entering the low-end of the tablet market, but Microsoft appears to be taking aim at the higher-end.

On Tuesday, Microsoft gave consumers the first glimpse of the Surface’s price tag. A pre-order page on the company’s website lists the tablet with 32 GB at $499, not including the Touch Cover, or $599 with the Touch Cover. There is also a 64 GB model with a Touch Cover for $699. In comparison, Apple’s third generation iPad retails between $499 and $829.

In addition to the different price tags, Microsoft unveiled its first commercial for the Surface Monday night.

With Apple now confirming a media event taking place on October 23 in San Jose, with the tag line saying “We’ve got a little more to show you,” consumers and investors can expect the tablet war to heat up even more over the next several weeks. At the very least, Microsoft’s exposure to the tablet market provides the potential for a bullish catalyst and an opportunity to build its own ecosystem. As long time Wall St. Cheat Sheet readers know, a ‘Catalyst for a Stock’s Movement’ is the ‘C’ in our CHEAT SHEET investing framework.

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