Windows RT Surface tablet for $199? Not unless it's heavily subsidized

Windows RT Surface tablet for $199? Not unless it's heavily subsidized

Summary: While tablets such as the Kindle Fire and Nexus 7 have conditioned buyers to think of tablets -- but not the iPad -- as cheap, these are a different animal to Microsoft's Surface tablets.

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Rumor has it that Microsoft is planning to price its Windows RT-powered Surface tablet at a highly-competitive price point of $199. Unless Microsoft is willing to take a serious dive on each tablet sold, this sort of pricing is never going to be achieved.

There's been a great deal of mystery and speculation surrounding how Microsoft plans to price its Surface range of tablets. The information vacuum from Redmond has led to all sorts of rumors and speculation, from crazy pricing to this latest low-cost prediction.

This latest pricing prediction comes from an anonymous tipster via Engadget.

Microsoft has remained coy about Surface pricing. There was a statement from Microsoft early on saying that they were "expected to be competitive with a comparable ARM tablet or Intel ultrabook-class PC," but nothing more concrete.

But what exactly is competitive for an ARM tablet these days?

As much as I'd like to see a Windows RT-powered Surface tablet sell for $199, unless Microsoft is going to heavily subsidize the tablet, it's just not going to happen. While tablets such as the Kindle Fire and Nexus 7 have conditioned buyers to think of tablets -- but not the iPad -- as cheap, these are a different animal to Microsoft's Surface tablets.

The scant information we have about these tablets would suggest to me that the hardware is going to be significantly better than what Amazon or Google have packed into their tablets. Even with the best will in the world, I can't see Microsoft getting the bill or materials for this device to under $250. To be honest, I'll be surprised if the bill of materials comes in at under $300.

Microsoft could take the bold step and decide to subsidize the Surface with the idea of getting them into the hands of as many people as possible, but even this could be a massive gamble. Not only might the move further upset Microsoft's hardware partners, but any hopes the company may have of clawing back the subsidy hinges on whether it can encourage people to make good use of the Microsoft Store. If people don't use the Microsoft Store, Microsoft loses out.

That said, given that the Windows Store will be the only place that people will be able to get their hands on software for Windows RT devices, it is unlikely that people will be able to shun it completely.

Microsoft's also going to have competition. While the likes of Asus, Dell and Lenovo are all planning tablets, Toshiba has decided that the time isn't right because of "delayed components that would make a timely launch impossible". But come the general availability of Windows 8 in October, there's going to be no shortage of tablets to compete against Microsoft's Surface.

Maybe Microsoft is planning to throw some serious cash at the problem and offer people a high-quality tablet at a low price and hope for the best.

Image Gallery: Microsoft Surface tablet

Image source: Microsoft.

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

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41 comments
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  • The Best We Can Expect...

    Is that Microsoft sells the Surface RT devices for a price close to their manufacturing cost and that they bet on revenues from the Windows Store sales for profit.

    Although possible, this scenario remains somewhat unlikely because of the negative effect it would have on the OEMs that also jumped on the RT bandwagon. They would be left out from the secondary revenue stream and therefore unable to compete at the price level.

    We all wish the Surface RT devices are very cheaply priced but market reality will prevail.

    Except if Microsoft has a new trick in its sleeve...
    TheCyberKnight
    • MS Is Already "Subsidized"

      Doesn't have to pay itself the supposed $85 OS fee. Or if it has to log it, it will be one division paying another.
      Yacko
      • they've commented on that

        MS commented that they are were on equal footing with their other OEMs with regards to the license fee. the rumor mill on Windows RT was not $85 though, closer to $20 or $30.
        selliott80919
        • Yeah, right. Because shifting $$ from

          one ledger in your books is the same as actually cutting a check to another company.
          baggins_z
      • How do you know they don't have to pay the $85 OS fee?

        Most business' sell products between divisions for accounting reasons, so even if it's one division paying another, there's really no difference between that and one company paying another, as the paying entity has to make up the diffence for the OS expenditure.

        Otherwise it comes out as a "money losing division" on the books, which isn't good, either.
        William Farrel
      • Right, MS developers work for free

        Windows 8 is free to MS.

        Oh wait, it isn't. It costs MS hundreds of millions of dollars in development costs before they get $85 back from their first sale. It is the OEMs that get the bargain since they don't have to risk anything. MS is the one taking all the risk.
        toddbottom3
        • Considering Vista,

          which had users flocking back to XP was highly profitable, I wouldn't call it a risk. But I guess that's the advantage of having a monopoly. You get to spend millions of dollars making a product worse and people still have to buy it from you.
          synop
  • moneyball

    how much did the xbox lose before seeing it's first profitable quarter? (hint: an unbelievable amount of money).

    how much has msn/hotmail/search (and all it's variations) - general web offerings - lost in the last 10 years? (hint: never a profit shown, not one nickel).

    how much is ms paying developers to develop for their new "metro" platform?

    how much did ballmer say ms was willing to lose in search to "compete" with google? (hint: billions and billions).

    and what did ballmer just say? something like that wherever apple goes they're going to be right behind them?


    nobody, but nobody, plays moneyball like microsoft. if they want into a market they are more than willing to buy their way in.
    oneleft
    • Maybe not

      MS stock is flat, and they posted their first loss ever last quarter. For years, Microsoft has subsidized their failures off their lock in with OEMs in the business PC market. But businesses aren't buying PCs as much lately. Or upgrading Office as often. You get rid of those two cash cows, and MS won't be able to afford to buy their way into markets anymore.
      baggins_z
      • true

        but the cash cow twins are still very profitable. and until we see a severe hit on them it's unlikely ms is going to change it's moneyball ways.

        as ballmer once said: ms may not be the first or the best but we just keep coming and coming and....

        translation: they'll pump money into it until the competition dies

        that's the beauty of never ever having to worry about a bottom line. nobody can compete with that.
        oneleft
    • Most companies (and businesses) lose money in the begining

      What's so surprising about that?

      You make it sound like everyone but MS made billions from day one. The truth is, everyone "buys" their way into the market.

      It's how business works.
      William Farrel
      • really

        so, every company out there can afford to lose billions and billions and billions of dollars to stay in a market?

        name one. name me a company besides ms that loses billions of dollars on a product or service and keeps that product or service available year after year after year. losing money year after year after year. name me a company that introduces a product or service (you know, that starting point of entering a market) and then says in that market for years losing money.

        one will do nicely.
        oneleft
        • Does sony count?

          Their television division has lost $10 billion in the last decade.
          nab123
          • actually

            their tv division has lost money for 8 straight years, the entire company has lost the money you're talking about. they entire company is in trouble, and not just from tv's.

            and they are closing plants, dividing the tv section up, focusing more on digital games and mobile.

            and this is across the board as panasonic and others are being hit by a loss of demand in tv's.

            so what is microsoft doing about it's losses? why pumping even more money into it. msn search, live search, all the other ms searches that have come and gone? money drains. so now they're pumping billions more into bing. as i said, when you don't have a bottom line to worry about it's a pretty simple game to play.
            oneleft
          • No the loses are from the TV devision

            From the article http://www.dailymail.co.uk/sciencetech/article-2127643/Sony-plunges-6-4BN-annual-loss-Samsung-Apple-eat-businesses--giant-cuts-10-000-jobs-worldwide.html

            "The Sony veteran, known for reviving the PlayStation gaming operations through aggressive cost-cutting, has promised to get the struggling TV business - which has lost $10 billion alone in 10 years - back on its feet within two years."

            Yes Sony is making reforms, but they've been willing to lose money year after year, which is what you asked us to find.
            nab123
          • correct

            however, they are not "willing" to lose money year after year. they are losing money year after year and they are in big trouble. across the board they are hurting.

            without the cash cows ms would be scrambling too. they're not. ballmer said they're willing to lose billions and billions to fight google.
            ms entire online effort has lost an estimated 8 billion in the last decade. they're not scrambling.
            xbox lost an estimated 10. they're not scrambling.

            can't find the article but i'll keep looking, which says sony tv has lost money for the last 8 years straight. yours says 10.
            oneleft
  • Of course it will be "subsidized"

    MS did that with the original Xbox product. There really isn't any other way to get people to buy a mediocre "also ran" in a crowded market without MS buying into the hardware costs.

    However, I doubt that even at $199 it will be a bargain. Time will tell and this is a last chance effort by a company that has enjoyed monopoly status in the old desktop paradigm. While desktops will still exist, they are completely commodity items now, more than ever...
    Splork
    • Not true, Splork. But then you weren't trying to be truthful,

      were you?

      You know full well you're making stuff up to appease yourself.

      Funny how EVERY other company in the world got to where they are legitimatelly, while MS, (to you) is the lone company that didn't.

      Actually very funny. ;)
      William Farrel
      • uh

        i didn't read anything about every other company in the world in his post.

        funny how ms can do no wrong in your book, even though history says they did a lot of wrong.

        actually, that's very funny! ;)
        oneleft
      • "appease yourself" ????

        ap·pease/əˈpēz/
        Verb:

        Pacify or placate (someone) by acceding to their demands.
        Relieve or satisfy (a demand or a feeling): "we give to charity because it appeases our guilt".

        So I am placating myself? Oh wait, I must be guilty. But I just don't know what I feel guilty about. Is that it? Do tell, please.

        Oh and how MS got to where they were is an easy story. It starts with Bill Gate's mother sitting on the Board of Directors at IBM when they were searching for an OS for a little toy called the IBM PC. Later, IBM asked MS to develop OS/2 and paid MS handsomely for their work on an OS that MS never finished for them. IBM had to do that with other resources while MS bought DEC's VMS based OS and turned it into NT. Meanwhile MS was strong-arming OEMs to pay for a Windows license for every PC they sold. MS was found guilty of abusing its monopoly status not once, but twice.

        That how legitimate MS's success really is. Funny actually....
        Splork