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Microsoft Surface for $199, are they crazy?

by Mark Tyson on 14 August 2012, 22:08

Tags: Surface, Windows 8

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We have had quite a few Microsoft Surface price estimates since the announcement of the pair of Windows 8 devices a couple of months ago. If only Microsoft let us know at that time, from the horse’s mouth, a rough estimation of the street prices, it could have saved us a lot of time either dismissing the Surface as too expensive or deciding it’s going to be a world dominating device and the best thing since sliced bread.

To refresh you we’ve had estimates of the Surface RT and Windows 8 Pro versions at $599 and $799 respectively, $599 and $999 respectively, and TNW had the Windows RT version tagged at $1,000 using prices leaked from a Swedish online retailer site a couple of weeks ago.

The latest price we have is only for the Windows RT Surface but it’s an amazing price rumour – the Windows RT Surface tablet will launch on October 26th for only $199. An “inside source” revealed this information to Engadget at the recent TechReady15 conference held by Microsoft. The source says all the launch plans were laid out at this event. We hope he didn’t have a Mr Magoo moment and get his decimal point in the wrong place.

If we look at that price and assume it is for real then we would guess Microsoft is following the familiar old console loss-leading pricing strategy. Aiming to get lots of people to buy into the platform and then make money out of the software – Windows Store/Marketplace, 30 per cent from all sales. (Incidentally Nintendo are charging £39.99 for the New Super Mario Bros. 2 download) Another IT example of selling hardware cheap to make profits elsewhere is printers, with some of the ink prices per litre rivalling that of Chanel No5.

Also we must consider the competition. A perfectly legitimate pricing strategy is “going rate pricing” in which a manufacturer prices its product similarly to competitors who make similar products. This makes the battleground more focused for the company; it’s all about product features and USPs because the pricing is not an issue for consumers. What do we have at the $199 price point? The Amazon Kindle Fire, the Google Nexus 7 and lots of other Android tablets.

However the Surface RT has a 10.6 inch HD screen which is larger than the Kindle Fire and Nexus 7. Also it has a construction which was highlighted by Microsoft to be of a premium nature in design and materials.

There is also a big problem for Microsoft partners trying to sell Windows RT devices if Microsoft makes the Surface available for $199. We just had news today about four partners making Windows RT devices. How could they compete with the Microsoft hardware offering if it costs partners $85, or anywhere near that amount, to install a copy of Windows RT? Not good for the hardware partners. I’d say a price similar to the going rate for a 10.1-inch Galaxy Tab or 10.1-inch ASUS Transformer tablet would be more feasible; $399 for the base unit. As everyone else reporting this story has said – we’ll see in the not-too-distant future.

HEXUS Forums :: 29 Comments

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I'll take two at $199.

Although I expect we're more likely to see it at $299-399.
I really don't see that happening…
Not going to happen. Google are selling the nexus for that and not making any money. $299 maybe, just maybe but $399 sounds more like it.
If they do that, there will be a whole bunch of really pissed off OEMs, and that pissed-off-ness could linger for quite some time.

For Microsoft it is par for the course to steal their partner's business from under their feet.

Wonder if some of those OEMs will gain a sudden high interest in producing the next generation of Android/Chromebooks.
I bet that Microsoft have annoyed the OEMs enough through the mere existence of the ‘surface’. I would have expected Microsoft to price the surface on par, or slightly undercutting (if possible) the iPad, as it seems that that is the best jugular to aim for.

$199 sounds too good to be true, therefore it probably is.

Well played “anonymous source”, you have successfully created a rumour and temporarily destabilised the interwebz. Please eat your cookie whilst stroking your manly stubble.