Microsoft faces ‘major dilemma’ pricing Surface tablets against iPad

“In order to compete with Apple’s iPad, Microsoft may have to price its Surface tablet models so low that it will alienate its longstanding PC partners, according to a new analysis,” Neil Hughes reports for AppleInsider.

“Chris Whitmore with Deutsche Bank doesn’t have high hopes for the Microsoft Surface tablet lineup recently unveiled by the company,” Hughes reports. “In a research note provided to AppleInsider on Monday, Whitmore said he feels Microsoft is ‘grasping at a competitive response,’ and he believes that response will fall short of competing directly with Apple’s market leading iPad.”

Hughes reports, “In particular, he feels Microsoft has a “major dilemma” in how it will price its Surface tablets. For the low-end ARM models running Windows RT, he believes Microsoft will have to undercut the iPad on price to find any success. But in doing so, Microsoft could make it impossible for its Windows partners to compete… As for Surface “Pro” tablets running the full Windows 8 operating system, Microsoft has said those devices featuring traditional Intel processors will be priced comparable to Ultrabook notebooks, which usually cost around $1,000. Whitmore noted that Surface tablets running Windows 8 will carry a 20 percent premium over the high-end 64-gigabyte iPad with 4G LTE, and they will likely have worse battery life, fewer third-party apps and a thicker form factor.”

Read more in the full article here.

26 Comments

  1. This deserves a standing ovation! I am proud to witness yet another great collision between SS Microsoft and an iceberg!

    Captain Ballmer-Full Speed Ahead!

  2. There was so many nuggets in that keynote. To me, these two really summarize the Microsoft mentality:

    “Now, when you talk about hardware fading to the back, another thing that’s super important is the SEEMLESS LINES throughout the product. When you look at this product, you’ll see lines going throughout it…” Yep. Seemless.

    “Putting this kickstand in the product flies right in the face of seamless lines and getting it perfect. But we really spent a lot of time here. We knew that if we did not get the kickstand perfect, this device would not work.” OK, if the kickstand is not perfect the device won’t work.

    This says a lot: seamless lines… Seemless Lines… SEEMLESS LINES?!?!?!? And a tablet that is not functional without a kickstand?

    And he kept calling it “this product” or “the device”. Steve and Co. always refer to the products in the keynotes by NAME. “We call it ‘iPad’.” “We call it ‘iPhone’.” We don’t call it, “the device.”

    I just had to get that off of my chest…

    1. “We knew that if we did not get the kickstand perfect, this device would not work.”

      Thank you for pointing out this gem.

      I believe this neatly summarizes the MS design mentality.

  3. I’m a bit confused about the pricing problem.
    It’s well known that apple makes a large margin on their products, the iPad included, somewhere around 40%… Right?
    And isn’t it standard operating procedure for PC makers to be happy earning the skin of their teeth?
    Assuming an average of 600? for an iPad there should be a couple hundred there to play with and considering that the Surface will not have cellular options – should be a piece of cake. *Laughs manically, ha ha ha ha ha*

    1. All that you hear about Apple’s profit margin per machine is from extrapolated data. Suffice it to say that they make enough margin to continue the pricing method that they use successfully. Even so, MFST will have a difficult time pricing surface correctly, because there is an expectation in the market of a certain kind of pricing structure.

    2. But at APPL’s Volume, and usually prepaying Components, sometimes investing in the Factory or technology. MS does not have the volume, at most pays cash, so porbably gets higher costs.

  4. Steve Balmer is SO disconnected from the real world that he thinks his table must cost a lot more than the iPad because he still thinks is a privilege to have windows on your computer.

  5. going through the websites like ZDnet it seems few tech journalists understand that Surface is an admission of Failure and Disaster from Msft.

    apple and Goggle (via Android) has wrecked Msft’s ‘fat profit’ selling OS to OEMs model. (for years Msft has sucked the profits from the PC business making 90% margins of Windows while PC oems made something like 5%)

    Msft was supposed to want to charge OEMs $85 for its tablet OS. $85 vs free android! Charging less and they will make no money (if they charged say $10 , sales of 1 m will only make them a measly 10 m in gross revenues, net profits will be lower – a rounding error in current msft revenues )

    so Msft was in a blind. OEMs balk at 85 a copy OS (the tablets will be so expensive they will be DOA vs iPad or android tablets). if they sold tablet OS cheap and it cannibalize Windows notebooks or desktops then Msft would be shooting their own fat OS profit centers.

    Seeing Apple’s integrated hardware/ software like iPhone taking 80% of the world’s cell phone profits, Surface therefore was an act of desperation to survive to make money.

    few realize that Apple iOS , apps selling for a few bucks (vs the $$$ for msft applications) , and CHEAP OSX upgrades has put big holes into Msft.

      1. The Android phone makers are paying patent royalties to MS. IIRC, it’s on the order of $10/Android device.

        MS should have quit while they were ahead.

        1. Actually, the cell phone royalties will fund their R&D for the next decade. Maybe.

          Microsoft will gut the bottom of the cell phone market by riding Nokia into the ground. That money will bankroll what ever else they decide to do in the mobile space.

          But, I don’t see much future at Microsoft if you’re a blue-collar worker. There will be another round of layoffs if they can’t make surface RT work.

          Everyone’s gonna say they’ll want the Intel version because the ARM version is untested and the support just won’t be there.

          Will Microsoft pull back the curtain to reveal hundreds of programmers who have been chewing through code to make ready hundreds of apps for Metro? It would be a neat trick if they could pull that off, but I suspect, crickets.

          Is Microsoft willing to commit millions to promote Metro? Even at the risk undermining Windows?

          I think they’re going to do what they always do; try to be everything to everyone all at once. Rob Peter to pay Paul and just keep throwing stuff at the wall until either, Ballmer spends all the money, or, the board throws him out, at which time Microsoft new CEO will deliver the world’s first Microsoft-branded PC.

          … and scene.

  6. Mac OSX = $30
    Window 7 = wait it’s complicated…
    Windows 7 Home Premium
    The best entertainment experience on your PC. Starting at $119.99 (OK, what’s the catch – how much more do I need to spend?)

    Windows 7 Professional Work from anywhere more easily.
    Starting at $199.99

    Windows 7 Ultimate
    More computing power. Starting at $219.99 (where does it end – have you been holding back my computing power at the lower price points?)

    Apple Pages= $10 on iPad
    Apple Pages= $20 on Mac OSX
    Micrsoft Word=$119 – $499.99 as part of Office

    Do people know how much more inexpensive and better Apple Software is than Windows?

    This is why the Windows tablet must succeed – to lock people into MSFTs higher priced software ecosystem to protect its margins. BIG TROUBLE.

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