OEMs feel the 'challenges' of high Windows 8 pricing

OEMs feel the 'challenges' of high Windows 8 pricing

Summary: Some OEMs and OEMs are far from convinced that Windows 8 will reinvigorate PC sales, and are worried that if Microsoft low balls the price of its Windows RT-powered Surface tablet, this could have a negative knock-on effect on sales.

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Hardware equipment (OEMs) and design manufacturers (ODMs) are cautious in the run up to the launch of Windows 8, with price being the major concern, claims Sterne Agee analyst Vijay Rakesh in a research note.

The problems, according to Rakesh, are many-fold. First and foremost are OEM and ODM concerns that Windows 8 will push up pricing.

"We believe OEMs-ODMs are becoming more cautious on Windows 8 ahead of launch," writes Rakesh, "with focus on potentially high platform pricing with Windows 8; consumer training and support required with a totally new Windows 8 interface and features versus Windows 7, all driving a more conservative PC outlook".

It seems that some of Microsoft's hardware partners are also concerned that if Microsoft low balls the pricing of its Windows RT-powered Surface tablets, this will have a negative knock-on effect on sales.

"Also the new $199 Surface tablet retail price might be a 'too competitive' price point for the Windows 8 and Windows RT Ecosystem, given a higher bill of materials compared to that price tag," claims Rakesh.

Another problem is content, and the realization that availability of content for tablet users to consume is more important than price.

"While there are expectations around Windows 8 and Windows RT tablets, there is also a realization that what makes iPad tablets sell is content, not tablet pricing".

In other words, there's a worry that while Microsoft has been focusing on Windows 8 and the hardware, it has neglected the content ecosystem.

Hardware ODM Compal is also worried that Ultrabook sales will fall short of Intel's expectation. It expects the thin-and-light devices to account for between 5 and 10 percent of notebook sales during the fourth quarter of 2012, rising to around 20 percent in 2013. This figure falls dramatically short of the 40 percent that Intel has previously touted.

Image source: Microsoft.

Topics: Microsoft, Hardware, Operating Systems, Tablets, PCs, Windows

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32 comments
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  • ?

    "Also the new $199 Surface tablet retail price might be a 'too competitive' price point for the Windows 8 and Windows RT Ecosystem, given a higher bill of materials compared to that price tag"

    Has it been confirmed that the Surface will be 199?
    CriticalSection
    • I'm betting

      I'm betting that $199 rumor has more to do with whatever 7" reader Microsoft is developing along with Barnes & Noble than any 10" tablet the company may deliver. I have a very hard time believing that the 10" Surface device that Microsoft recently demoed is going to sell for $199.

      If it does, OTOH, I my just buy a few to prop up some wobbly furniture I've got around the house, since, at that price... hey... why not.
      dsf3g
    • No

      So far that is just a rumor.
      Emacho
    • No it has NOT been confirmed.

      MSFT has never stated a $199 price for the Surface RT. That's nothing but a rumor that continues to be propagated as truth by articles like these that subtly imply it's true.

      Irresponsible.
      Caviar Black
    • Nope

      That was just someboday's wild-ass speculation.

      Of course, Adrian, who knows little about anything, quotes it as if it were gospel!
      Ian Easson
  • What a load of c*ap AKH! You are full of it.

    "Both Quanta and Compal reported elevated levels of inventory on their balance
    sheets. Quanta's inventory was up ~18% q/q and Compal's inventory was up ~14%
    q/q, with both saying the primary reason was to meet 3Q/4Q demand, though end
    market NB PC demand is more flattish."

    I wonder how the above paragraph just went past your head. You just are trying to spin to meet the daily demand of clicks by your boss. FYI, NB PC is not notebook, it is Net Book.
    Ram U
  • Windoze 8 is gonna be a BIG FAIL

    Doesn't matter how much it costs, it's gonna fall harder than Vista and as usual people will either stick with 7 or move to much better platforms like Mac and Linux
    shellcodes_coder
    • Ha. Thats all I can say.

      I guess you havnt noticed that because every single prediction for reasons for failure of Windows 8 that has been proposed by the haters has in fact resulted in a huge "FAIL" for the predictions themselves, that nobody is listening anymore to the haters.

      I know it must drive the haters mad that it looks more and more every day that Windows 8 will in fact be a massive success.

      The fact is, most rational ppeople who first looked at Windows 8 reasonably wondered how the new UI would affect the makret for Windows 8, but we actually should thank the haters for doing every single thing they could think of to explain why Windows 8 will fail, and as a result of every single reason proposed thus far being proved to be sheer nonsense it now seems there really isnt a good reason for Windows 8 to be anything other than a huge success.

      Thanks haters. Job well done!

      You can feel free to buzz off now, your no longer requiered and are simply relegated to nothing more than a sometimes amusing distraction as you seem to be still trying to do your job, which is done.
      Cayble
      • What's a "hater"?

        Anyone who doesn't agree with you?

        I've rarely seen such a sophomoric and imbecilic term tossed around indiscriminately. "Hater's gonna hate, man." Oh wow.

        No twit term reminds me more of adolescent prattle than the all-encompassing HATER.
        klumper
      • Hey Cayble,

        I've been reading posts on MaximumPC.com for months and months now about Windows 8 and it is abundantly clear from reading said posts that most power users hate Windows 8 and will continue to hate it once it comes out. Windows 7 will be the new XP for years to come. However, it may very well prove true that Windows 8 will be a success with the average tech-illiterate person. Plus, once Windows 8 is on all new computers people will be forced into buying it if they want a new computer so of course it will sell a certain volume by necessity.
        josh92
    • If Windows 8/RT fails as a tablet platform, ...

      Microsoft is going to have a tough row-to-hoe in the consumer space.
      M Wagner
  • If Microsoft is charging $40 for retail upgrade

    Imagine what OEM's are able to buy Windows 8 for? Probably half that. They should stop complaining, embrace and stop this non-sense.
    adacosta38
    • Agreed

      Remember when the netbook craze first broke out and manufacturers were rushing cheap Linux devices to market? Microsoft responded by offering them Windows XP Home for $15.00 a license and pretty much wiped out the Linux netbook market in one fell swoop. What that shows is that Microsoft is willing to show ruthlessness with pricing if they feel its necessary to forestall a perceived threat to their business. My sense is that Microsoft sees the threat posed by the iPad and will be ruthless once again to promote Win 8 RT and Professional as tempting alternatives to iOS.

      Will Microsoft succeed? That's an open question. But it won't be for lack of trying.
      dsf3g
  • OEMs feel the 'challenges' of high Windows 8 pricing

    No challenges. The OEMs get Microsoft Windows at a discount and then mark up the price just like they do with the hardware. If Microsoft can make the products for cheap then so can other OEMs. This is a case of them just wanting to do the same routine. Microsoft showed them how to step up their game but it looks like they are not listening.
    Loverock Davidson-
    • Lovie ...you should send all the OEM's a special e-mail

      and explain to them how they're missing the point. All OEM's must have herd of you by now and with your bravdo Lovie, you can surely do what Microsoft hasn't been able to do so far. Everyone comes to zdnet everyday just to here what you have to say on any subject, were all just en awe of your widsom :-)
      Over and Out
      • Apple has never chosen market-share over marketing.

        Apple knows its customers and will do what it take to please them. They are not (and likely never will be) a mass-market vendor. Apple will not get in a price-war over tablets or any other product.
        M Wagner
  • Another advantage for Apple.

    Apple of course has to spend some money on development of their own operating systems. Apple with the iPad can avoid the Intel and Windows taxes other companies have to pay. Since Intel and Microsoft basically take all profits on PCs, Apple can easily maintain competitive pricing without those profit drainers.
    Oden79
  • Tired of paying $200 for Windows and $200 for Office? Just say no.

    I have 10,000 hours invested in my stuff, that happens to be in Office format.

    Rather than pay ransom to Microsoft, I'm converting to Android Apps.
    jnffarrell
    • The point is they don't cost $200

      Microsoft Office Home & Student 2010 cost $119
      Microsoft Windows 7 Home Premium cost $119

      You can run them till your hardware dies, unlike Linux, you have to upgrade every 6 months just stay current. The average user does not want to do that. Also, most new computers already come preloaded with Windows 7 and user will likely already have a previous version of MS Office they can use. So, I don't get the point of your post. Let me guess, you are going to use Angry Birds to prepare your reports when lack of Internet bites you in the you know where.
      adacosta38