Is there any way claims of a $199 Microsoft Surface RT makes sense?

Is there any way claims of a $199 Microsoft Surface RT makes sense?

Summary: There are now two reports claiming Microsoft plans to price its Windows-on-ARM tablet for $199. Would subsidies, subscriptions and/or separately priced add-ons make this low-ball price plausible?

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In the past week, we've heard two different claims that Microsoft is planning to price the ARM-based version of its Surface tablet at $199. (Claim one, claim two)

winrtpcreal

Is there any way these rumors could possibly be true? Especially given the fact the Surface hardware is custom-made-to-order and likely to be available in small quantities out of the gate? (And, based on the limited time the press and analysts had with the devices, of seemingly super-high quality for which one would expect to pay a premium price?)

Microsoft is not commenting on the $199 rumor. I can't get a "no comment." Just no response at all from the Windows team.

Update: A Windows spokesperson said the company had "no comment on rumors or speculation."

Here's what we know: When Microsoft unveiled its Surface PC/tablet devices earlier this summer, it offered very bare-bones pricing guidance: "Suggested retail pricing will be announced closer to availability and is expected to be competitive with a comparable ARM tablet or Intel Ultrabook-class PC. OEMs will have cost and feature parity on Windows 8 and Windows RT," according to Microsoft's press release.

On the Surface RT side of the house, most of us Microsoft watchers have assumed the "comparable ARM tablet" meant the iPad 2, which starts at $399.

What if Microsoft meant a different ARM tablet, like the Kindle Fire or the Nexus 7? The Fire is $199, as is the Nexus 7. I guess that's one way Microsoft could claim pricing comparability. However, the Softies have been playing up the business-readiness of the Surface RT, in spite of its inability to run existing Windows apps other than Office. They have been clear they don't think the Surface RT is a consumer and/or consumption-only device.

What if Microsoft meant the suggested retail price would include optional add-ons, such as one or both of the keyboards (touch and type) that are tailor-made for the Surface? (Right now we have no idea how much these keyboards will be and how Microsoft will package them up with the Surfaces.) In other words, maybe the "base" Surface RT unit is $199 and a keyboard adds another $100 or so. We also still technically do not know whether the previews of the four Office apps "included with" the Surface RT devices will cost anything. Microsoft officials still have not said on the record that these will be free.

What if Microsoft is planning to charge extra for the services that Surface RT users might want and need, such as Xbox Live, Xbox Music and Video, extra SkyDrive cloud storage and maybe even Skype? This could be a case where the base unit costs $199 and these additional services raise the price by a hundred dollars or more, making it more "comparable" to an iPad. Or, again, maybe the base price of a Surface RT unit is $199 if you agree to a two-year subscription contract for these services -- similar to the way Microsoft is pricing its $99 Xbox 360/Kinect bundle with a two-year Xbox Live subscription included?

Lots of what ifs... few real details.

Microsoft did announce earlier this week that there will be a handful of OEMs making Windows RT-based ARM devices which could be available starting this fall. Among those OEMs: Asus, Dell, Lenovo and Samsung.

It's interesting there was no mention by Microsoft this week of Toshiba, which had announced it was planning to deliver an ARM-based Windows RT device. Bloomberg BusinessWeek says Toshiba axed its plans as a result of a parts shortage. Industry analyst Patrick Moorhead with Moor Insights & Strategy  said he thinks it is more likely troublesome drivers may have been behind Toshiba's cancellation.

Topics: Tablets, Microsoft, Windows

About

Mary Jo has covered the tech industry for 30 years for a variety of publications and Web sites, and is a frequent guest on radio, TV and podcasts, speaking about all things Microsoft-related. She is the author of Microsoft 2.0: How Microsoft plans to stay relevant in the post-Gates era (John Wiley & Sons, 2008).

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170 comments
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  • Impossible

    The components of the Surface are much more expensive than the Nexus 7 or Kindle Fire. The hardware is not comparable at all. Almost every single part and component of the Surface is more expensive, down to the dual MIMO Wi-Fi antennas. The case, display, higher clocked SoC, memory, storage capacity, expansion ports, etc. are all much more expensive on the Surface. No way to match price of the Nexus 7 without taking crushing losses on each unit sold.
    cool8man
    • Yes, but...

      Microsoft can afford to take a hit on price to gain rapid market share upon release. And people are starting to talk about Win8 and especially RT as a means to get people spending money in the Windows Store. That means they could take a loss on these, just as Amazon presumably does on the Kindle Fire.

      All of that said, pricing Surface RT at $199 would butcher the OEMs, and I doubt Microsoft is interested in further burning any of those bridges. In my opinion, they need to sell Surface near what other OEMs are getting for comparable hardware, to avoid permanently damaging relationships and trust with the other hardware manufacturers.
      1DaveN
      • There is taking a hit on price and there is jumping off the bridge.

        Earlier analysts were talking most of six hundred bucks for the Win RT model and the rumour mongers are now talking around two hundred (which would indeed be regarded as a frontal assault on the OEMs). The former were talking rubbish then and the latter are spreading rubbish now. The very least I could even pretend to believe would be around $300.
        FrederickLeeson
        • Maybe

          It's microsoft's way of getting the OEMs in line. People are saying that OEMs will go to Android "because it's free". What they fail to remember is Android could very well be more expensive to OEMs due to Apple, Microsoft, and other corporations licensing. Indeed, I actually see the downfall of Android being it's "free and open" strategy. Who knows? Microsoft could be cutting deals to OEMs for making W8 handsets. Instead of the rumored $85 license they could be at a $50 or cheaper and Android is the $125 alternative.

          Either way, you're right. It's open war on OEMs. But at this point I don't think Microsoft should have loyalty for companies who haven't shown any loyalty in return. Frankly, I think Android is crap simply because OEMs are cheap makers of cheap hardware and write their software in the VERY same way. CHEAP.
          riskbreaker232
          • Android's neither open or free

            Depending on the device you may or may not access source, and things like CarrierIQ were so deep embedded, core code, etc., plus you pay by all their targeting and tracking services which is google's business model.
            It is pretty flexible and cheap compared to Windows or iOS though I think.
            ossoup
          • It is good new

            Many thank to Microsoft. I will buy 4 and will run jelly bean ported on it in order to take benefit of the Android ecosystem which is far better than Windows RT ( lack of applications) . By the way, if Android is crap, why Microsoft should worry and sell their tablet even cheaper in order to compete. If I can buy 1000 and can port jelly bean on Microsoft RT tablet, I will be able to resell them on ebay and make a lot of profit. Once again, many thank to Microsoft , please sell your RT tablet less than $200.
            oldman60
          • No You Won't!!!!

            You are not allowed to put anything on the RT devices. Only Microsoft will be allowed to do this. Try again!!!
            eargasm
          • uhh

            Why don't you just buy a surface RT tablet and use the bluestacks program which lets you run all 400,000 android apps on the surface as if they were apart of the system. just saying.
            Vincent Millan
          • No operating system is "free" to OEMs.

            The open-source model is both a blessing and a curse. Innovation quickly runs amok if there is not central entity deciding which features can coexist in order to keep the platform cross-compatible. This open-source approach is not very different from what AT&T did with UNIX. The licensed source code to protect their investment but the industry ended up with dozens of "flavors" of UNIX - all licensed to different universities.

            By matching Apple iPad pricing, Microsoft will leave traditional OEMs intact and free to pursue both the high-end (enterprise) markets and the low-end consumer markets.

            Microsoft is only competing for the hearts and minds of consumers who would otherwise pay a premium for an Apple product.

            If Microsoft is sending a message to anyone, it is Intel ... letting them know that Microsoft may not need x86/x64 much longer.
            M Wagner
          • it is consumers who will decide

            While currently android is geared more towards phones than tablets I don't think it can be dismissed as cheap crap

            Many many users like android and I for one much prefer it to ios, though for a tablet I would at the moment choose ios. However that said now that I have a larger screen galaxy I small questioning whether I really need to replace my aging iPad at all. Simply because something is expensive does not make it good. As others have suggested it could be that ms might produce a minimalistic version where consumers have to subscribe or purchase extras. They could also be quoting a with airtime contract price. E.g. you have to sign up for two year air time contract to get it at this price.
            In the end of course it is all rumour and speculation to fill columns like this!
            cymru999
          • War on OEM....

            It could and probably will be a war on OEM, but you have to consider the fact that there really aren't many choices for the OEM manufacturers if they want to sell hardware. Android.. yeah, been done and slides in to the "same ol'" category.. but quite a few of the OEM manufacturers also sell laptops and desktops. Tablets, yes... but Samsung and others still make hardware that relies on windows, so they'll have to give a little bit.
            The thing is, Microsoft HAD to use their own hardware off the bat. They've had very bad results in relying on other manufacturers when it comes to keeping up with their software and at the same time staying consistent when it comes to performance between devices. OEMs will still have the chance to run Win8, but Microsoft can't risk relying on schotty hardware like android does from device to device, especially with the requirements it'll need for enterprise services.

            ...WHICH brings me to another point. The general population doesn't take into consideration what's at stake and what's going to make money...

            Right now, BYOD is an utter nightmare. Policies within the enterprise don't flow correctly into existing devices without full salary teams on it constantly, and it's a crap shoot when it comes to security holes. It's difficult to reach most cyber standards for government and medical, while still feeling safe that you're covered.

            With win 8 tabs, from Microsoft (just as apple), you'll be able to run ALL the policies that you need via GPO, as if it's a laptop, and people will get to have a tablet that they've been begging for. Not to mention, for some of these tabs, you'll be able to run the same software. You may not think this is a big deal, but running VPN, A/V, encryption, and follow it up with custom reg keys, is HUGE. Enterprises will gobble them UP.

            Microsoft knows this, and it'll be a breath of fresh air for cyber and IT personel everywhere IF it works. You'll still have the ASUS and HTC of the world, but to be consistent, companies will stick with what they know. When this happens, they may be burning bridges or starting wars, but they'll still need microsoft if they sell other hardware that relies on windows. AND, they'll still be selling more hardware that runs on Win8 if it spreads to the enterprise as they're expecting.

            Keep in mind that BES sucks and people are getting away from it. Even the windows mobile devices are supposed to have better enterprise support, and those moving to 2010 Exchange or greater will also embrace this, as they're fed up with RIMs garbage.

            Anyway, just some thoughts to ponder. It may seem like a war, and it will be, but Microsoft knows what it's doing and knows its customers. If the enterprise explodes like I'm thinking, they'll not need OEM for tabs.
            mockylock
          • War on OEM....

            It could and probably will be a war on OEM, but you have to consider the fact that there really aren't many choices for the OEM manufacturers if they want to sell hardware. Android.. yeah, been done and slides in to the "same ol'" category.. but quite a few of the OEM manufacturers also sell laptops and desktops. Tablets, yes... but Samsung and others still make hardware that relies on windows, so they'll have to give a little bit.
            The thing is, Microsoft HAD to use their own hardware off the bat. They've had very bad results in relying on other manufacturers when it comes to keeping up with their software and at the same time staying consistent when it comes to performance between devices. OEMs will still have the chance to run Win8, but Microsoft can't risk relying on schotty hardware like android does from device to device, especially with the requirements it'll need for enterprise services.

            ...WHICH brings me to another point. The general population doesn't take into consideration what's at stake and what's going to make money...

            Right now, BYOD is an utter nightmare. Policies within the enterprise don't flow correctly into existing devices without full salary teams on it constantly, and it's a crap shoot when it comes to security holes. It's difficult to reach most cyber standards for government and medical, while still feeling safe that you're covered.

            With win 8 tabs, from Microsoft (just as apple), you'll be able to run ALL the policies that you need via GPO, as if it's a laptop, and people will get to have a tablet that they've been begging for. Not to mention, for some of these tabs, you'll be able to run the same software. You may not think this is a big deal, but running VPN, A/V, encryption, and follow it up with custom reg keys, is HUGE. Enterprises will gobble them UP.

            Microsoft knows this, and it'll be a breath of fresh air for cyber and IT personel everywhere IF it works. You'll still have the ASUS and HTC of the world, but to be consistent, companies will stick with what they know. When this happens, they may be burning bridges or starting wars, but they'll still need microsoft if they sell other hardware that relies on windows. AND, they'll still be selling more hardware that runs on Win8 if it spreads to the enterprise as they're expecting.

            Keep in mind that BES sucks and people are getting away from it. Even the windows mobile devices are supposed to have better enterprise support, and those moving to 2010 Exchange or greater will also embrace this, as they're fed up with RIMs garbage.

            Anyway, just some thoughts to ponder. It may seem like a war, and it will be, but Microsoft knows what it's doing and knows its customers. If the enterprise explodes like I'm thinking, they'll not need OEM for tabs.
            mockylock
        • This is ARM people.

          Getting near $200 is not impossible. The surface specs are just a bit higher than the Nexus and then you add a larger screen.

          Considering the RT devices are more of a consumer and consuming device, Microsoft should follow the XBox model and take a loss.

          The X86 tablets are a different story. Those are essentially laptops without keyboards.

          The OEMs are fine. The RT tablets is a market that doesn't exist right now, so how is that screwing the OEMs? Microsoft's OEMS make Desktops, Laptops, and some one-off Tablet-PC's. Microsoft doesn't have any OEM's in the ARM tablet market right now. All these guys are competing on the same day at launch.
          kjb434
          • How could there be an RT market right now?

            You do realize that the OS has not been released yet right? Since it hasn't been released to manufacturers how could there be a market? If MS releases the Surface RT at a loss to be made up by subsidizes it would most definitely be an assault on their OEM partners than have been waiting to produce a Windows RT tablet.
            non-biased
          • Not just a bit higher, much higher.

            "The surface specs are just a bit higher than the Nexus and then you add a larger screen."

            This is false.

            2GB vs. 1GB RAM
            32GB vs. 8GB storage
            1.2GHz CPU 416MHz GPU vs. 1.6GHz CPU 520MHz GPU
            10.6" high quality display vs. 7" low quality display
            Magnesium case vs. Plastic case
            USB vs. no USB
            Memory card vs. no memory card
            HDMI vs. no HDMI
            MIMO Wi-Fi vs. single Wi-Fi antenna
            Big battery vs. small battery

            The Surface hardware has to cost at least twice as much to manufacture as the Nexus 7.

            The only way to get the Surface down to $199 would be with a subsidy contract.
            cool8man
          • Good Post!

            Plus Microsoft has over 600 million satisfied customers to wave around. May be able to get some discounts for volume???? Why have it if you don't use it?
            eargasm
          • 60 billions !

            Assuming they just subsidy $100 per device, it will cost them 60 billions to satisfy 600 millions users . Their deep pockets will be empty. Apple with their heavy and deep pockets, will buy, embrace and kill Microsoft. And poor IT people, whose they swear by Microsoft must be trained again to deploy Apple products.
            oldman60
          • ELEVENTY BILLIONS!

            They did it with the xbox. It's not what they're putting into it now, but how little the hardware will cost in a year.

            And, you're wrong. Apple doesn't work with 3rd party encryption, group policies, unlicensed (non-mobile) Cisco VPN, existing apps, so-on, so-forth, that most enterprises already have in place. BYOD isn't embraced by most enterprises because of the unknowns and security. If you bring a windows-based tablet into an environment that's already capable of it, you're jumping into a new demographic that tablets haven't been able to take over.

            So... no, you can't kill microsoft with an apple product in this aspect, especially now. They had how long to do it, and everyone who has cyber requirements still can't adopt it? It's just a toy if it can't be controlled by IT/cyber, and microsoft knows this. Any company who doesn't allow BYOD (which includes massive corporations) and has been running laptops under their own policies, will be able to do this with no changes necessary, given they buy a Win8 device which is powerful enough to play well with existing apps.

            People DO have deep pockets... but will they buy a glorified iphone that IT doesn't approve, or something that they're familiar with that allows for better security? I'm guessing the latter. We're talking about companies like Siemens who have thousands of techs running around programming PLCs with windows apps to straight up secretaries who want a tablet to throw in their purse but COULDN'T because they're not fully fips compliant, etc. Not to mention, they'll SAVE hundreds of dollars over a laptop if given the choice... and it could possibly do the same THING as the laptop, with OFFICE.

            I'm sorry, but you need to look at this from 30,000 feet. Enterprises are foaming at the mouth to get a tablet that isn't $1600 which will plug-and-play in their existing infrastructure without sacrificing familiarity, security or sanity. Finally, something we can USE and get management off of our back so we can do our jobs and not worry about BYOD!
            mockylock
        • cheaper

          at 300 dollars. i got my galaxy note last march at bhd30
          monthly with bhd39 process fee for 12months contract with viva .
          ilovesards@...
      • But would they not run the risk

        of being fined for "dumping"? From what I understand, it is illegal to initialy price and sell a product line at a loss, for almost any reason.
        John Zern