Waiting for the iClone.

Apple's Next Hit Will Be a Microsoft Clone

Leonid Bershidsky is a Bloomberg View columnist. He was the founding editor of the Russian business daily Vedomosti and founded the opinion website Slon.ru.
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If you were disappointed with Apple's low-key, same-but-better pitch for the new iPad yesterday, take heart: as it did with cell phones, Apple is just buying time until its next big imitative leap.

Samsung debuted its first, much maligned and hugely successful Galaxy Note -- the first phone with a bigger-than-5-inch screen -- in September, 2011. For two years afterwards, Apple was content to present incremental improvements to the iPhone. Compared with the iPhone 5, the iPhone 5s just added a fingerprint sensor and an improved camera (plus a few other features that most consumers didn't care about).

Meanwhile Apple carefully observed the "phablet" market, watched other handset makers follow Samsung's example and erode its market share, and experimented with ways to make a big phone easier to navigate one-handed. It struck just when Samsung started posting lower profits, because of the increased competitive pressure.

It was a perfectly-timed attack and, after setting a first-weekend record -- 10 million iPhones sold -- iPhone 6 and iPhone 6 Plus are continuing their rampage. Apple chief executive Tim Cook said yesterday that the first sales month for the two new phones was the company's best ever "by a lot. A whole lot."

The iPad Air 2's most important improvements on last year's device are, again, a fingerprint sensor and a better camera. As with iPhone 5s in 2013, it may appear as if Apple is stuck in a rut of timid, incremental innovation. My bet, however, is that it's watching another innovator collect bumps, get bad reviews, then get things right. Once that innovator's success is assured, Apple will pounce.

This time it isn't a Samsung product Apple is watching, but Microsoft's Surface Pro.

Microsoft hit on the idea of producing a tablet-laptop cross in 2012, incurring losses and writing off inventory as it refined the concept. This year, it finally produced a device that reviewers liked -- the Surface Pro 3. It's reasonably convincing both as a laptop and as a tablet, albeit a large and heavy one. Microsoft has not released numbers, saying only that the Pro 3 was its fastest-selling tablet yet -- the company underestimated demand, creating shortages in some markets.

The analysis company Gartner puts the Surface Pro in the same category -- "premium ultra-mobile" computers -- as Apple's MacBook Air laptops. Gartner predicts that unit shipments in this industry category will increase from 32 million in 2014 to 55 million next year. The leap won't all come from MacBooks, although though they have outperformed the market so far and will probably continue to do so. Surface Pro and imitations of it by other companies will provide the bulk of the added shipments.

Tablets are nice devices -- you can watch videos and play casual games on them, and kids love them -- but they are not versatile enough for work. Typing long text on the on-screen keyboard is torture. The iPad's 9.7-inch screen is too small for spreadsheets and makes it impossible to fit a comfortable-sized keyboard into a latch-on cover. Microsoft has been so stubborn about getting the Surface Pro right because it fills an obvious customer need, providing a device that is equally useful for work and entertainment.

Before yesterday's Apple event, rumors were strong of an upcoming giant iPad, to be called iPad Pro or iPad Plus. There were even leaked pictures of a device with a 12.9-inch screen, bigger than the Surface Pro's 12-inch one. It didn't come this time, but it will.

"We think Apple may need to further blur the PC/tablet line by introducing a 13-inch tablet as a convertible with multitasking and file management capabilities," UBS wrote in a report after yesterday's presentation. That's a good description of a Surface Pro clone, but to produce one, Apple needs more data on Microsoft's sales and more time to figure out how the device could be improved.

Two obvious areas in which Apple could beat Microsoft are the tablet's weight and keyboard performance. Microsoft, however, has a jump on the competition when it comes to running a desktop operating system on a tablet: Apple's mobile operating system, iOS, doesn't handle data storage and multitasking as well as Windows. Apple would need to run its Mac OS on the bigger iPad to make it a true tour de force, or to expand iOS functionality significantly.

"Good artists copy, great artists steal," Steve Jobs used to say, thinking he was quoting Pablo Picasso. Apple has proved with its big phones that the saying makes great business sense, and it will want to do so again. The big iPhones are cannibalizing the iPad's market share, and Apple would rather have the iPad compete with the MacBook Air. Bigger changes than the ones we saw yesterday are only a matter of time.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Leonid Bershidsky at lbershidsky@bloomberg.net

To contact the editor on this story:
Marc Champion at mchampion7@bloomberg.net