Is Microsoft Surface Already Doomed?
Jun 21st 2012 7:52PM
Updated Jun 21st 2012 7:58PM
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.
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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