Over the past two years, Microsoft's Surface and Apple 's iPad have been on diverging paths. Apple's iPad sales have fallen for six consecutive quarters, with revenue plunging 23% year over year to reach only $4.5 billion last quarter. In the meantime, Microsoft's Surface revenue between the first quarters of 2014 and 2015 more than doubled, reaching $888 million from $400 million.
Even if Apple's overall iPad sales still exceed by a wide margin sales of Microsoft Surfaces, the numbers indicate that 2-in-1 devices are becoming trendy and gaining ground against traditional tablets. Sales for the Microsoft Surface tablet keeps rising.
Especially among enterprise customers, the Surface and other similar 2-in-1 Windows devices have become popular as convenient replacements for traditional laptops. Meanwhile, the iPad's main weakness in the enterprise is the fact that it is incompatible with older Windows software.
Many companies chose to upgrade older computers to 2-in-1 Windows devices instead of iPads, as a result. For jobs that require mobility, like factory floor managers, sales force, or healthcare professionals, 2-in-1 devices eliminate the need to use both a tablet and a PC.
Research company Gartner estimates that the worldwide sales of 2-in-1 devices will increase by 70% annually to reach 21.5 million units at the end of this year. The company also believes that the launch of new fanless processors from Intel and the launch of Windows 10, which has scalable desktop and tablet modes will support that growth.
The growth of the 2-in-1 market comes at a time when the worldwide PC shipments experience a slowdown. In the second quarter, PC sales have plunged nearly 10% annually. Many Windows hardware manufacturers, including Hewlett Packard and Asus, are launching their own Surface like devices.
The rising popularity of phablets and the long upgrades cycles of the iPads are crushing the demand for Apple's mobile PCs. Research company IDC expects that the global tablet sales will rise only 2.1% annually to reach 234.5 million units this year. However, during last quarter's conference call, Tim Cook, Apple's CEO, declared that he is "still bullish on iPad", with hopes that consumer and business upgrades will "eventually occur."
Beyond new color choices, slightly thinner frames and Touch ID, Apple hasn't introduced many compelling new features to convince current users to upgrade. And the new enterprise applications that were recently launched recently in partnership with IBM still work fine on older iPads.
There are two possible ways for Apple to boost the iPad's appeal. It can introduce a new 2-in-1 device of its own or could merge OS X and iOS into a single scalable operating system, similar to Microsoft Windows 10. Time will tell which option Apple will choose.
