Microsoft's pricing could kill Windows RT, Windows-powered ARM tablets

Cheaper x86-powered tablets that can run any software that can run on a PC will be seen as a safer bet than a cut-down tablet PC running a locked-down operating system.

According to multiple hardware vendors, Microsoft is charging OEMs as much as $95 for each Windows RT license.

Tech site VR-Zone quizzed a number of hardware vendors on the convention floor at Computex Taipei and $85 was "the most commonly quoted price" for a Windows RT license for ARM-powered tablets, with quoted prices ranging between $80 and $95.

To put this into comparison, it's rumored that Microsoft charges OEMs about $30 per Windows Phone license for a smartphone, and around $50 for a Windows 7 Home Premium license for a PC.

If this pricing is accurate -- and it does correspond to rumors and whispers that I've heard from OEMs -- then it could have far-ranging implications for Windows RT and Windows-powered tablets.


The first is that Windows RT-powered ARM tablet vendors are going to have to absorb this additional cost. This essentially means that we're not going to see cheap Windows RT tablets. If the Windows 8 pricing structure remains roughly the same as that for Windows 8, then x86-powered Windows 8 tablets should come in at a lower price point purely because the operating system loaded on the devices is cheaper.

Another implication is of this pricing is that it's clear that Microsoft is not interested in competing at the low-end of the market with Windows RT. Android, a free operating system, allows OEMs to save on the cost of having to license a platform. This in turn allows them to make a cheaper tablet and command a better profit margin per device sold.

It's also clear that Microsoft is not interested in Windows RT competing against the $399 iPad 2. Given the bill or materials breakdown I've seen for ARM hardware, it's going to be impossible for OEMs to bring a device to market that matches this price point when you include the price of Windows RT. In fact, it's going to be hard for OEMs to compete against the $499 iPad 3.

Based on hardware bill of materials I've see, I'm now expecting Windows RT tablets to come to market at around $600, with high-end models priced as high as $900--1,000. Even at $600, the market is going to look at Windows RT tablets as premium products, and as the price climbs closer to $1,000, I am all but certain potential buyers will gasp in disbelief.

It's possible that by staying out of the cheap and budget end of the market that Microsoft is trying to associate Windows RT tablets with quality. The problem with this is that the consumer and enterprise markets have already associated Apple and the iPad with quality, and it will be almost impossible for Microsoft to change this opinion based simply on price of the Windows license or the end hardware.

I think that Microsoft's justification for charging more for Windows RT is the fact that, unlike Windows 8, it will ship with Office "15" components such as Word, Excel, PowerPoint, and OneNote.

This might be enough to convince some to take a gamble on Windows RT on ARM-powered tablets, but it's a massive gamble. After all, as far as the enterprise is concerned, I think that a cheaper x86-powered tablet that can run any software that can run on a PC will be seen as a safer bet than a cut-down tablet PC running a locked-down operating system, even if it comes with a free copy of Office "15".

Image source: Craig Simms/CNET.


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