Microsoft's profit margin on Surface Touch Cover could be 50 percent

Microsoft's profit margin on Surface Touch Cover could be 50 percent

Summary: The combination protective covering and innovative physical keyboard may be a highlight to the company's bottom line when it comes to the new tablets.

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TOPICS: Microsoft, iPad, Tablets
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One of the highlights of Microsoft's recent introduction of its Surface tablets was the Touch Cover, a combination protective covering and innovative physical keyboard. It may also be a highlight to the company's bottom line when it comes to the new device.

Walter Pritchard, a Citigroup research analyst, recently spent time with Microsoft execs and the Surface, and has written that he believes the Touch accessory will be priced somewhere between $60 and $100. In comparison, you would need to purchase a $49 Smart Case and spend $69 for a wireless keyboard to get a not-so-equivalent from Apple for the iPad.

Microsoft plans to offer two keyboard covers---Touch Cover and Type Cover. Both protect the Surface and act as keyboards. The Touch Cover has a touch sensitive keyboard and has garnered the most attention. The Type Cover is thicker and has a tactile keyboard. 

In addition to offering a better deal than Apple's equivalents on the accessory front, Microsoft should make a healthy profit margin on the keyboard cover, according to Pritchard, who believes the company could net 50 percent on the Touch Cover. He concludes that the margin on the Touch Cover alone "could help substantially with the economics of the [Surface]."

Those economics could face trouble initially, as Microsoft will be working hard to get the Surface Windows RT's price as close to $500 as possible to compete with the latest iPad. (The company has already said the Surface Windows 8 Pro will be priced like an Ultrabook laptop, which means closer to $1,000.) But Pritchard believes the profit Microsoft can reap from its Touch Cover may help push the price of the Surface RT tablet down to $400 by the second half of 2013.

One can't help but wonder if Microsoft can make a 50-percent margin on an accessory that includes a full keyboard and trackpad, what Apple's profit margin is on its Smart Cases, whose biggest technological innovation is the ability to wake up your iPad when you open the case. In developing its own tablet hardware, Microsoft may have been wondering the same thing.

[Via Business Insider]




Topics: Microsoft, iPad, Tablets

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28 comments
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  • Exciting!

    A reminder that Apple products are grossly over-priced:

    "One of the highlights of Microsoft's recent introduction of its Surface tablets was the Touch Case, a combination protective covering and innovative physical keyboard. ... offering a better deal than Apple's equivalents on the accessory front, Microsoft should make a healthy profit margin on the case ..."
    Tim Acheson
    • So you're going to have to pay extra for it?

      That will only price it too high to compete. Only serious Microsoft Fanboys/Zealots will buy these. You'll know who the Micronerd is. You know the nerd that always got "swirlies" in High School :p
      Jumpin Jack Flash
      • Angry, to the last, eh JJF?

        And we know what person you were in school, but out of the goodness of our hearts, we won't embarrass you by posting it here.

        Why does it bother you that more then just (what you call Microsoft Fanboys/Zealots) will buy this?

        We understand you're lonely, but don't bring your negativity here. Do something positive about your life.
        William Farrel
        • You should entertain him, Wile

          Take him on a trip somewhere....

          You're so concerned.

          lol...
          CaviarBlack
        • Ballmer is desperate and lonely

          Surface is the last throw of the dice from the loser Ballmer. It has Zune written all over it.
          Van Der
    • Forget That

      You mean to tell me Microsoft is actually trying to make a profit on this right out of the gate? Long shot. I can't afford a tablet that hasn't even proven functionality when I could get 2 laptops in its place for the same price
      Fat Albert 1
    • Exciting?....?

      Thanks for the reminder that Apple is showing how a successful company should be run and that Microsoft's fanboy_in_chief cheerleader in the UK is sufficiently worried about his beloved MS missing so many technology boats over the last few years, that he labels news about the keyboard equivalent of typing on jelly, as...Exiting'
      The blind leading the blind.
      frogspaw
  • Fingers crossed for October or November

    I want the Surface Pro so bad that I keep looking at Surface photos like they're girls. It's a little disturbing. These leaks never help. Anyway, October (earliest rumored Pro release date?) is just long enough away that I can actually afford this (and it being a business tax purchase, as well). Of course, I'll wait till everyone does their reviews on it.
    Cagny
    • Pro, Still Later

      The Surface RT was to be available at the time of Windows 8's release and the Pro about 3 months after. Based on the release schedule of Windows 7, watchers guess Windows 8 comes out in October. At this point, all estimated dates are guesses.
      DannyO_0x98
  • Rude shock coming ...

    Trying to price match the iPad is not going to be a successful strategy. If the RT has a full-function version of Office even if not much else, it might survive. I don't see how a $1000+ tablet has a chance. The issue in competing with ultrabooks is that they are a moving target with new models being introduced all the time. Better specs and lower prices are going to appear almost instantly, leaving the Surface left to compete strictly on the Microsoft brand.
    terry flores
    • I'm afraid Microsoft is going to botch this...

      It sounds like Microsoft is going to try to price these for what they're worth (which is near the iPad), and that's a recipe for failure.

      If they use anything but the Xbox strategy (sell at a loss in the beginning), the Surface RTs will fail. It's as simple as that.

      Apple & the iPad are even more powerful than Sony was with game consoles. Please, Microsoft... do not be stupid. There's A LOT riding on the Surface--the fate of Windows 8. This isn't Zune. This is serious. You need this to succeed. Really succeed.
      metromalenyc
      • They might throw their whole tablet scheme out the window...

        ...in a couple of years. That wouldn't surprise me, given their lack of commitment to anything other than enterprise. Xbox being the exception.
        CaviarBlack
    • Security Essentials

      Windows 8 comes with Security Essentials antivirus (best available AV in my opinion).
      wmac1
      • Only a broken OS needs to be packaged with antivirus

        Van Der
      • There is no 100% safe.

        Only a fool thinks their operating system is safe and doesn't need defenses.
        Emacho
      • There is no 100% safe.

        Only a fool thinks their operating system is safe and doesn't need defenses.
        Emacho
  • As soon as I can place an order...

    I'm ordering the Win RT, blue Touch Cover... delivered to my London, UK Addresss :)
    nessrapp
  • Microsoft's profit margin on Surface Touch Cover could be 50 percent

    I see no problem with Microsoft wanting to make a profit. These ZDNet bloggers keep saying Microsoft is aiming for an iPad price. With the iPad going for $829 there is no reason why Microsoft can't charge as much for a better platform. We will know the real prices when its released.
    Loverock Davidson-
    • Unless it is a dummy

      I would be surprised if the profit margin is anything less than 50%. This is a box that no body is allowed to touch, and nobody is allowed to do anything with
      Van Der
  • Priceless MS Moment!!!!!

    I was watching a live blog of the Surface announcement and I couldn't help but get a chuckle out of the touchcover announcement. The tech pundits (who always seem to have a slanted eye towards Microsoft and glossy eyed over anything Apple) were commenting on the cover before the keyboard was shown. The comments were basically...."Oh, how cute. It looks just like the SmartCover.", "This isn't innovative, this is a knockoff of Apple." When the keyboard was revealed the tech pundits were speechless and didn't know what to do. When they finally did regain their composure they were like...."Wow, ummmm, that's really cool.", "That's innovative and much better than a SmartCover."

    The reaction was PRICELESS!

    The Touch/Type Cover are one of the main selling points for Surface. I can't wait to get one and would be willing to shell out a bit more for the keyboard. If I can get everything on an Surface RT for around $500-$600, I'd be cool with that. Realistically, if you buy an iPad most are paying for the $600 model, add a cover $50, add a keyboard/dock $100 and you are getting close to $800 or more.
    SmoothDouglas