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Is Microsoft Surface Already Doomed?

Microsoft (NAS: MSFT) Surface is on its way. It's not quite here yet, but the software giant just took the wraps off of its big foray into tablet hardware.

The company notably declined to disclose one of the most critical pieces of the competitive puzzle: price. Instead, Microsoft simply said its pricing would be "comparable" to other ARM Holdings-based tablets, and Intel (NAS: INTC) Ultrabook PCs.

According to rumors from the Far East, the final price tag of the Windows RT model sporting an NVIDIA (NAS: NVDA) Tegra 3 is expected around $599, and the Windows 8 Pro model, with Intel's latest Ivy Bridge chips, could ring up to $799.


That's suicide.

If the Windows RT Surface ends up at $599 for the entry-level 32 GB model, that would put it at pricing parity with Apple's (NAS: AAPL) third-generation iPad, with 32 GB of storage. Without exception, every single tablet that has entered the market over the past two years to compete directly with the iPad on price has lost. Badly.

Never mind Motorola's bold attempt to price even higher than the iPad, when its first Xoom tablet launched early last year; there simply aren't any success stories of competing tablets at the same price. The only tablet to see decent sales thus far is Amazon.com's (NAS: AMZN) $199 Kindle Fire, putting the device in an entirely different market segment from the iPad.

Even though the Windows 8 Pro Surface should be more on par with Ultrabook laptops in terms of features and pricing, many consumers will likely still compare it to the iPad as a tablet.

Street analysts are also seeing pricing as a key component to Microsoft's competitive strategy. Sterne Agee's Shaw Wu says that the Surface would need to be at or below $199 Kindle Fire territory to do well, and Topeka Capital Markets' Brian White says that the device "will need a healthy price discount to the iPad" to score sales. Even Apple's last-generation iPad 2 is available at the $399 price point.

That's even before you consider the possibility of an iPad mini later this year, which could price anywhere from $250 to $300, leaving even less pricing room for rivals.

At $599, Surface would be doomed.

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The article Is Microsoft Surface Already Doomed? originally appeared on Fool.com.

Fool contributor Evan Niuowns shares of Amazon.com and Apple, but he holds no other position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of Microsoft, Amazon.com, and Intel. The Fool owns shares of Apple. Motley Fool newsletter services have recommended buying shares of Apple, NVIDIA, Intel, Microsoft, and Amazon.com. Motley Fool newsletter services have recommended creating a bull call spread position in Microsoft. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. Motley Fool newsletter services have recommended writing puts on NVIDIA. The Motley Fool has a disclosure policy.

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chrisckx

What if it comes bundled with a version of Office in that price? Office by itself is a $200-300 value; even a "lite" version of just Word and Excel would be worth $100 and increase the productivity of the whole package significantly, taking advantage of the physical keyboard.

June 22 2012 at 10:33 AM Report abuse rate up rate down Reply
Jay

Given the huge lead the iPad has, it's very unlikely the WinRT version will come in starting at $599. The latest Samsung Galaxy Tab 2 can be had for $399. Apple sells its SmartCase for $29 and the Galaxy tab has functional cases with integrated keyboards available for $45. MS knows this and realizes that it has to compete aggressively on price, when it comes to WinRT. A rumor like this is coming from unhappy 3rd party vendors trying to poopoo on MS' parade. Assuming the RT version does not integrate LTE, then it's reasonable to assume that MS will price it no higher than $399 with the case going to an extra $75. If bought together, I could see MS offering it for $450, which given that it includes the three most used Office apps creates tremendous value. As for the Pro version, I think the price quoted is a little high but not as much as the RT version. In essence, the Pro version has not comparable competition, so it will carry a price premium, which should not hurt sales. The most important factor will be how well do people take to the radical new W8 Metro UI.

June 21 2012 at 9:04 PM Report abuse rate up rate down Reply
Champ10

biased reporting...... why sell a better tablet in theory at a lower price than a comparable ipad? The ipad is a good product, but it is a Large phone at best. Thankfully MS took the time to build an actual NO compromise OS for a tablet, but due to pundits that are afraid of competition they will always get a bad wrap. I hope the Surface takes of and takes off rather well.

June 21 2012 at 8:57 PM Report abuse rate up rate down Reply
Welovebill

Meh another lame article. Dude Windows Tablet will rule =]
we are talking about creative tablet and not a dumbpad XD

June 21 2012 at 8:39 PM Report abuse rate up rate down Reply
Joe Acerbic

Yeah, sure, it's doomed because of an anonymous rumor. Moron.

June 21 2012 at 8:36 PM Report abuse rate up rate down Reply