Windows RT pricing dilemma rears its ugly head again

Summary:Microsoft is stuck between a rock and a hard place with Windows RT pricing. Price it low and face less-than-expected profits, or take on the iPad et al and squeeze out the lucrative enterprise market.

Windows RT is shaping up to be a giant headache for Microsoft.

In theory, Windows 8 on ARM tablets would shape up as a progressive and aggressive strategy to get the forthcoming version of Windows on as many devices as possible. The headache --- a hangover from the Windows XP days --- is Microsoft's attempt to spread out Windows 8 on as many platforms as it can to drown out the screams from its ageing legacy operating system. 

I don't think for one second it's an "attack on Apple" or a "blow to Android."

Businesses are holding out for a tablet that offers interoperability and compatibility with software they already use, and maintains a high level of productivity without users having to relearn an entirely new operating system.

That's Windows, right?

Microsoft has a customer base and wants to keep up with the curve, and not fall behind. But it boils down to price, and the software giant still hasn't hinted at what costs IT managers and C-level executives will have to set aside in preparation of how much they will need to spend on the soon-to-be-released shiny rectangles. 

Barrons has what ThinkEquity analyst Yun Kim had to say:

"We are wary of potential pricing issues regarding the upcoming Windows 8 release, especially the RT version that supports ARM-architecture. Given the lower pricing points of non-PC devices, we believe there could be potential pricing headwind in the low-end of the market ($300-$500 per device), which could result in revenue growth meaningfully lagging unit growth."

If MSFT decides to target the mid-to-high end of the market ($500+ per device), we believe unit sales could be lackluster, and investors are likely to be wary of MSFT competing directly against AAPL.

Microsoft says its own branded Surface tablet will be priced competitively with other tablets on the market, but declined to elaborate on if this means by current prices, or future prices.

Microsoft still doesn't know how much --- or how little --- it will get from OEMs to run Windows 8 or Windows RT, and could end up in an Amazon-like situation where it's selling mid-range tablets at a razor thin profit margin --- and market share aside, it could still fail to generate anything meaningful in terms of profit.

Analysts believe that Surface poses no threat to the iPad. Microsoft likely isn't looking to threaten an already established market; one that Apple single-handedly forged. It is however trying to fill an enterprise-sized gap with a modestly priced tablet that will appeal to those who are already locked into a Microsoft infrastructure. We're talking Office 365, and Microsoft Office users --- which let's face it --- that's pretty much every workplace, college and government office you enter.

Windows RT devices are merely looking-glass devices; they're slimmed down tablets that offer portable viewing of cloud-based services, and basic functionality on the go. 

The higher the cost of the tablet, the less likely IT managers will want to blow their entire IT budgets on. Microsoft can't spend their time worrying about what Apple's doing. Simply put: give the buyer what they want at the price they're expecting.

Topics: Microsoft, ARM, PCs, Tablets, Windows

About

Zack Whittaker writes for ZDNet, CNET, and CBS News. He is based in New York City.

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