The Microsoft-Apple Tablet Wars Commence

Consumers will be the ultimate winners, as competition forces tech giants to offer more value.

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In this June 18, 2012, file photo, Microsoft Corp.'s new Surface tablet computer is displayed at Hollywood's Milk Studios in Los Angeles.

There's a momentous presidential election going on this fall, but the more interesting competition might be a fresh battle between technology giants Apple and Microsoft.

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Apple has dominated the market for tablet computers since it unveiled the iPad in 2010, with its market share soaring to nearly 70 percent. But Microsoft aims to grab some of that with its new Surface tablet, based on Windows 8 software, which is now set to go on sale October 26. And Microsoft has announced that the Surface will undercut the iPad on price, which means consumers will be the ultimate winners as competition between the two tech titans intensifies.

The Surface will start at $499 for a 32-gigabyte model, which is $100 cheaper than the latest 32-gigabyte iPad. Beyond that, each gizmo offers features that critics will spend many thousands of words debating. If the tablet market develops the same way the market for PCs and laptops did, Microsoft will end up as the high-volume, lower-priced producer, while Apple will remain the pricier prestige brand.

Microsoft will distinguish its tablet with a few built-in features that come as extra-cost accessories for the iPad, such as a "kickstand" that props up the tablet and built-in versions of popular Microsoft programs like Word, PowerPoint and Excel. The Surface comes with a USB port, a convenient feature the iPad doesn't have. Microsoft will also offer an optional keyboard that's sized to the wider screen of the Surface, for more comfortable typing; keyboards for the iPad only come from third-party providers.

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But the iPad still has some obvious advantages. There's no cellular connectivity available yet for the Surface, so it's only connected when in range of a WiFi network. Apple, meanwhile, has established relationships in place with AT&T and Verizon, which offer cellular service for both the iPhone and the iPad, as long as you're willing to pay for it. There are about 250,0000 apps available for the iPad, while the Windows 8 app store is just starting up.

Then there are the intangibles. Apple has millions of devotees who are so dedicated that they'll stand in line for hours to buy the latest Apple gizmo. Microsoft, by contrast, has lots of customers but few true fans, and it inspires about as much loyalty as the local power company.

Critics will be quick to dub one tablet the winner, but the tablet market is quickly becoming so large that it will easily accommodate several winners, at various price points. Apple itself is likely to underscore that trend when it unveils a new product—widely expected to be some kind of mini iPad in the $250 range—at a formal event scheduled for October 23.

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That tablet would join others from Google, Amazon and Barnes & Noble at the lower end of the market. Meanwhile, bigger tablets built by Samsung, Sony and others, and powered by Google's Android software, already compete with the iPad (though not very convincingly). And manufacturers such as Dell, Hewlett-Packard, Asus and others also plan to introduce new tablets built around Windows 8, which means the tablet market may soon offer more choices than consumers even want.

Some of them will become familiar products, while others will quickly fade. And just about all tablets will adopt the features that turn out to be most popular, leading to a certain level of standardization. Apple could very well copy the keyboard that Microsoft offers with the Surface, for instance.

With so many newcomers, it seems certain that Apple will surrender some of its market share. The question for Apple is whether the rapid growth of the overall tablet market will allow it to sustain the high profitability of the iPad, or whether it will be forced to cut prices—and profit margins—in the face of competition. A surprising drop in Apple's stock price of late suggests that investors doubt Apple's ability to sustain what is already an enormous profit margin.

There could also be a new breakthrough device that is even more alluring than a tablet computer. Or, the focus could shift away from hardware to apps and new uses for portable devices, such as mobile payments. Either way, it seems likely that a few tech giants will be slugging it out for the next several years. Savvy consumers should root for all of them.

Rick Newman is the author of Rebounders: How Winners Pivot From Setback To Success. Follow him on Twitter: @rickjnewman.