Ask Matt: Will the Surface tablet revive Microsoft's stock?

ByABC News
July 1, 2012, 7:43 PM

— -- Q: Will Microsoft's (MSFT) Surface tablet computer be what finally gets the stock to start moving again?

A: It's ironic that a flat computer, less than a half inch thick, is what some investors hope will be the answer to Microsoft's flat stock.

Hopes are high on Microsoft's Surface, a line of ultra thin tablet computers that sport the power of a PC in the slim body of a touch-screen tablet. The computers were announced in mid June, shocking the public, which had no idea these devices were coming.

The Surface line of computers will come in two variants: The Surface and Surface Pro. The Surface is a low-cost tablet that runs special touch-optimized apps ranging from e-mail to news readers. The Surface is aimed directly at Apple's iPad tablet computer. Meanwhile the Surface Pro is a full-powered Windows-based computer, which not only runs the touch optimized apps, but can run all Windows-based applications, too.

The iPad is finally getting a run for its money. Companies, which have long preferred Windows-based desktop systems due to their flexibility and cost, will have a viable option when it comes to tablets. Executives, for instance, could be issued Surface Tablets giving them not just the ease-of-use interface but also access to corporate systems that run in Windows.

But as important as Surface is to Microsoft, it's just the showcase of more make-or-break trends at the company. The Surface isn't just a way for Microsoft to tap the market for tablet computers. It's also a demonstration of the company's upcoming Windows 8 operating system, which is one of the most essential products to the company's success.

The Surface could "set the standard" for what a Windows 8 tablet should look like and function, according to a report by Philip Winslow of Credit Suisse, who rates Microsoft stock "outperform." If other makers of Windows-based systems see strong sales of the Surface, they may follow suit in building compelling devices running Windows 8, Winslow says.

So if the Surface stokes interest in Windows 8, than it could be the tablet that gets Microsoft's stock back on the swing higher, he writes. And that's saying something, given how stagnant Microsoft's stock has been for years. Shares of Microsoft have been essentially unchanged since 2001, just after the tech-stock crash. Meanwhile, Apple has made inroads especially with consumers and become the most valuable U.S. company.

But the Surface might reignite competition in the computing industry, Winslow says. "We believe Windows 8 will have a more meaningful position in tablet than the market appreciates," Winslow says. "Which we expect to serve as a catalyst for the stock."

Matt Krantz is a financial markets reporter at USA TODAY and author of Investing Online for Dummies and Fundamental Analysis for Dummies. He answers a different reader question every weekday in his Ask Matt column at money.usatoday.com. To submit a question, e-mail Matt at mkrantz@usatoday.com. Follow Matt on Twitter at: twitter.com/mattkrantz