Windows RT pricing dilemma rears its ugly head again

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.

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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, Tablets, ARM, PCs, Windows

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62 comments
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  • So in other words you have nothing new to contribute to this?

    The pricing issue was raised at the kick off event, hasnt gone away, and youre providing zero additional information. Hard to see where youre getting the "again" part. Please dont post without substance.
    Johnny Vegas
    • He's got those student loans to pay off

      ;)
      William Farrel
    • So in other words you have nothing new to contribute to this?

      I am amazed about the lack of substance I regularly see in the posts on this site. I am not even sure what this post was meant to convey.
      LMCIS
  • You a mind reader?

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

    Are you some sort of mind reader, how did you know that MS had a headache....

    Windows software always sold with a healthy margin and probably will in the future.

    Stop all these stupid comparisons with apple and android...Apple has some crappy consumer software, and google is all pirated tech or open-source
    owllnet
    • You a hypocrite?

      Of course you obviously are. Why do I say that you ask? Well you call our the author on being a mind reader because he is predicting something negative for MS which you don't agree with. Yet we continually see you posting here like your a mind reader claiming Windows 8's victory over all yet you have no better way of know what will happen in the future than the author of this article. Your just pissy because you beloved MS's future was questioned.
      non-biased
      • Agreed, too many trolls,

        who happen not to be writing much but replies to the blogs. And sorry to be a pain but it's 'You're'.
        Jackie-Smith
  • "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."

    Says who? This analysis is brain dead on so many levels its not even funny. First, iOS (which is what we're really talking about here) has a learning curve of just about zero. Secondly, Metro is an entirely new interface to Windows 8, so that's where the learning curve will be. And, three, workers who can be productive on a tablet aren't using them to create massive spreadsheets or complexly formatted word documents, so they don't NEED a Microsoft tablet running a Microsoft OS and using a desktop version of Microsoft Office.
    baggins_z
    • End User or Business

      Don't confuse end user ease of use, with business ease of use. Windows 8 tablets will have some form of domain/networking support built in - and since many business use a network model based upon Windows Server, the ability to manage these devices will be quite attractive.
      roteague
      • Didn't we hear the same sales pitch with WinMo against the iPhone?

        When the iPhone first came out, i remembered hearing how the iPhone was never going to take market share from WinMo and BlackBerry in the enterprise (business). Because of their management tools and proving security strengths. What happened? No one uses WinMo today and the iPhone overtook Blackberry last year as the enterprise market leader.

        We are in a new era of computing, companies needs to adjust with the times of get left behind.
        dave95.
        • New erea?

          Don't folks say that each and every time? I think most people get it. And things do change. Big deal? No. You'd be in error if you didn't realize that.
          Narg
      • Don't confuse business ease of use with

        IT friendly. IT works for the user, not the other way around. Fortunately, it looks like more and more businesses are finally starting to realize that.
        baggins_z
        • That's the common misconception.

          As well as one of the downfalls of IT. As with every department of a company it should be working for the customer. You know that group that actually pays the bills....
          The successfull bussinesses realize that.
          harrim47
        • Not getting easier...

          Well said! Finally folks are starting to realize what their REAL job is. It's not computers, it's people!
          Narg
      • The domain is irrelevant

        "many business use a network model based upon Windows Server, the ability to manage these devices will be quite attractive"
        Dropbox, Skydrive, iCloud, Google Drive, Google Docs, Office 365, Windows Live, Gmail, etc. are not on your domain. Your domain is obsolete.
        AnalogJoystick
        • Okay...

          So how many LOB in-house apps are running in the cloud? The domain ain't dead yet.
          ultimitloozer
    • Metro is new in name only ...

      From the standpoint of a desktop user, the only thing NEW about Windows 8 is that there is now a Start Screen instead of a Start Menu. Other than that, the Metro interfaces works pretty much the same was as the Start Menu always did.

      There is a learning curve with the new Metro apps but, in the enterprise, that leaning curve will take place only as Metro apps are added to the enterprise workflow. In other words, as whatever rate the enterprise wishes.
      M Wagner
      • So in other words,

        The metro apps don't exist and will need to be developed. Of course I knew that but do believe it's funny that you bring that up now when many others (and you if I remember correctly) have claimed the enterprise wouldn't go to the iPad because they would have to rewrite their programs. See the double standards, it's obvious to everyone else.
        non-biased
        • It isn't about programs

          Ipads are going to enterprise, because it is the best available tech that can be used to get mobile work down.

          It isn't because iOS is so wonderful to do enterprise work on or give users a access to the tools they need to get their work done. It is more a case of businesses making due with what is available as best they can.

          Image those ipads were running OSX or Windows8. Which do you think enterprises will prefer to adopt?
          Emacho
    • re:"Businesses are holding out...

      You're right of course. Most employees that can get away with using something like an iPad can actually be let go. I would think that the majority of employers in this time of austerity actually want their employees to be doing real work and not arsing about playing games and watching movies.
      Pastabake
  • "give the buyer what they want at the price they're expecting."

    Well, that's the trick, then–isn't it? I think Microsoft is going to find that it's a lot harder than it sounds. Especially if you're not Amazon and Google, who have content sales (of various degrees of profitability), or Apple, whose design expertise and integrated software stack allows it to charge a premiums.

    Bottom line: if you can't make it as cheap as Amazon or as sexy as Apple you're going to lose a lot of money in the tablet market.
    matthew_maurice