There are lots of rumors and speculation circulating today that Microsoft has a smaller variant of the Surface — let's call it the Surface Mini until further notice — in the pipeline, and there's been a lot of focus on what screen size this mythical device will have. But it's not screen size that will determine whether the Surface Mini sinks or swims.
The general chit-chat hints that the Surface Mini will have a screen size of between 7.5 and 8 inches, putting it in the same ball park as Apple's iPad mini, and a smidgen bigger than Google's Nexus 7 and Amazon's Kindle Fire HD.
In other words, the Surface Mini has a screen size that's roughly the same as all other "mini" tablets. And as far as consumers are concerned, it's a mini tablet, and people aren't going to care about the odd half inch here or there.
It's going to come down to one thing and one thing alone: Price.
Microsoft's Surface Pro tablet — the version that runs the x86 version of Windows — costs between $899 and $999, depending on how much onboard storage is required. Compare this to the Surface — powered by Windows RT — which costs between $499 and $699, again depending on how much storage is needed. The optional keyboard adds another $120 or $130 to the price tag, depending on which keyboard is required.
The word is that the Surface Mini will land with a price tag in the region of $399. Compare this to the iPad mini, which starts at $329, and the Kindle Fire HD, which comes in at an incredibly low $199.
At a time when consumers are price sensitive, being the priciest "mini" tablet — especially while at the same time being the new kid on the block — is not going to help Microsoft gain traction with the new slab. While there's no way for Microsoft to compete with Amazon when it comes to pricing — the Kindle Fire HD tablets are being sold at cost to cost — the Surface Mini needs to be competing directly with Apple in terms of price, and at $399, it won't be.
Ideally, I would like to see the Surface Mini come in at the more disruptive $299. At this price, not only does it compete effectively against the iPad, at the same time it also puts pressure on Amazon at the lower end.
Bear in mind that these are rumors. However, Microsoft does seem to be pricing the Surface and Surface Pro tablets at the high end, so a $399 price tag is not far-fetched.