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This is not the tablet we expected. But it says a lot about where Microsoft is headed.

Rather than announcing a new Surface Mini yesterday, the Redmond company went in the opposite direction, unveiling a super-sized, 12-inch Surface Pro 3 with new features designed to make it a more reasonable laptop replacement.

Bloomberg reports that new Microsoft CEO Satya Nadella and new devices chief Stephen Elop nixed plans to show a smaller Surface at the event, concerned about tough competition in the market for small tablets — not only the iPad mini and Android devices but also existing Windows tablets.

clickinClearly a Surface Mini was in the works. The company had strongly hinted at the Surface Mini by inviting reporters to a “small gathering.” And Microsoft Surface leader Panos Panay seemed, at times, like he was dragging things out on stage, perhaps filling the void left by the canceled Surface Mini launch.

The decision signals that Microsoft will not try to fill every niche with its devices, and be all things to all users, unless it can bring something unique to the market. And it also indicates that Elop is shaking things up with a different perspective as he rejoins the company to lead its hardware and devices group, following the recent completion of Microsoft’s acquisition of Nokia’s devices and services group.

It’s also shaping up as a defining moment for Microsoft’s new CEO.

Here’s how Nadella explained Microsoft’s mindset in his opening remarks: “We’re not interested in competing with our OEMs when it comes to hardware. In fact, our goal is to create new categories and spark new demand for our entire ecosystem. That’s what inspires us and motivates us with what we’re doing in our devices and hardware.”

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Satya Nadella and Stephen Elop.

Whether the company’s hardware partners see it that way remains to be seen. Microsoft’s on-stage scale may have featured a MacBook Air, but most of those laptops that the Surface Pro would replace come from Lenovo, Dell, HP and others that make Windows machines … and, increasingly, Google Chromebooks.

Wall Street seems to like Microsoft’s move, with the company’s stock up modestly this morning.

In a note to clients this morning, Nomura analyst Rick Sherlund wrote favorably about the decision: “We liked the larger screen format, which plays more to Microsoft’s strengths in productivity than the much anticipated 7- or 8-inch Surface mini tablet/laptop that is more appealing to the tablet user where Microsoft has no presence and lots of competition (there may be no “oxygen” down market where iPad Mini and Android tablets dominate the market).”

But the larger question is whether the Surface Pro 3 will actually be taken seriously as a laptop replacement. Users will still need to make some compromises with a Surface Pro 3 vs. a traditional laptop.

For example, reviewer Ed Bott found a lot to like, including an improved Type Cover keyboard, but noted in his initial hands-on report for ZDNet, “The biggest stumbling block for some would-be buyers is going to be that kickstand, which is far more flexible than before but still will feel more awkward in the lap than a conventional clamshell design. (There’s a reason they call them laptops.)”

Anand Lal Shimpi writes on AnandTech, “In practice the new hinge with more stable type cover creates a much more laptop-like base, which definitely comes in handy when typing on your lap. In my brief time with the review unit I still found it to be less stable than a laptop, but it’s a far closer approximation to the laptop experience than it ever has been before.”

The Surface Pro 3 ranges from $799 to $1,949, without a keyboard, which costs $130. Pre-orders start to day, and the tablet hits stores next month.

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