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Pricing seen as key to success of Microsoft's Surface tablets

$600 for a Windows RT tablet could have customers walking away, analysts say

June 19, 2012 02:31 PM ET

Computerworld - Microsoft needs to hook customers with better pricing if it wants to capture market attention with its new Surface tablets, analysts said Tuesday.

Microsoft said it will roll out the Windows RT version of Surface with prices in line with Windows RT machines from makers such as Asustek Computer. Asus has shown a Windows RT tablet, but has not announced pricing or availability.

The Windows 8 Pro version of the Surface will be priced in line with Intel-powered ultrabooks by other vendors, Microsoft said. Those guidelines could put the Windows RT Surface at more than $600, and the Windows 8 Pro at more than $700, and possibly higher, several analysts said.

But those prices are too high to win favor with buyers who might be intrigued by the innovative Surface tablets with their attachable keyboards that double as covers, analysts said.

Jack Gold, an analyst at J. Gold Associates, said that $600 for a Windows RT Surface tablet would be a "non-starter." Even $500 would probably be too high unless that price includes a cover/keyboard, he said.

"I think the Windows RT version needs to be in the $400 range to compete with older iPads and the new Android devices," he said. The new iPad starts at $499.

Gold said a Windows 8 Pro Surface will probably cost $600 to $700.

Tom Mainelli, an analyst at IDC, said he assumed that the cover/keyboards will be sold separately, which could raise the costs substantially, possibly by $100 or more.

"All Microsoft said was that they will be competitive to comparable products, and I assume the covers will be separate," he said. "They spent a lot of time on the covers, so what will a $600 [Windows RT] tablet and cover cost? That will change [a buyer's] liability a lot."

If the Surface Type Cover, the one with keys that have an up and down motion, costs $150 on top of the price of the Windows RT, that "could make it a tough sell all of a sudden," Mainelli said in a separate interview.

The other new cover/keyboard is called a Touch Cover, with keys inside of a 3-mm-thick pad in multiple colors and a cloth-like feel. The Touch Cover's keys don't move up and down much when pressed, but there is still some movement compared to the lack of movement you get when touching a capacitive touchscreen keyboard, based on a quick Computerworld hands-on experience.

Both covers work for both Surface tablets and are the same height and width, although the Type Cover is thicker and has more symbols printed on its top key row for application shortcuts.

One advantage for Microsoft, as the hardware innovator in Surface tablets, is that it won't have to pay the software license fees for Windows RT or Windows 8 Pro that Microsoft charges OEMs (original equipment manufacturers).

That OS license to OEMs has been pegged at $85, at least for the Windows RT license, according to reports, which might cut out most of the cost Microsoft could charge for a cover/keyboard.

"Microsoft realized it came to market late and couldn't afford to miss [making a great product] out of the gate," Mainelli said. "They want to create a product that's competitive to Apple's iPad. They clearly believe [the way] to do that is to make it soup to nuts."



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