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Microsoft faces 'major dilemma' pricing Surface tablets against iPad

post #1 of 210
Thread Starter 
In order to compete with Apple's iPad, Microsoft may have to price its Surface tablet models so low that it will alienate its longstanding PC partners, according to a new analysis.

Chris Whitmore with Deutsche Bank doesn't have high hopes for the Microsoft Surface tablet lineup recently unveiled by the company. In a research note provided to AppleInsider on Monday, Whitmore said he feels Microsoft is "grasping at a competitive response," and he believes that response will fall short of competing directly with Apple's market leading iPad.

In particular, he feels Microsoft has a "major dilemma" in how it will price its Surface tablets. For the low-end ARM models running Windows RT, he believes Microsoft will have to undercut the iPad on price to find any success. But in doing so, Microsoft could make it impossible for its Windows partners to compete.

Whitmore estimates that PC makers will have to price their Windows RT tablets at around $650 to generate gross margins of about 20 percent. But if Microsoft were to compete with the iPad on price, it would "collapse the PC OEM profit pool," he said.

Even then, just matching the iPad in price wouldn't be enough, Whitmore believes. Given the variety and depth of applications available on the App Store, and the amount of money many users have already spent on iOS applications, Surface tablets running Windows RT will need to be priced at a discount when compared to the iPad if they will gain any traction, he said.

As for Surface "Pro" tablets running the full Windows 8 operating system, Microsoft has said those devices featuring traditional Intel processors will be priced comparable to Ultrabook notebooks, which usually cost around $1,000. Whitmore noted that Surface tablets running Windows 8 will carry a 20 percent premium over the high-end 64-gigabyte iPad with 4G LTE, and they will likely have worse battery life, fewer third-party apps and a thicker form factor.

Deutsche


Still, Whitmore believes Surface models running Windows 8 are more likely to find success because they offer backwards compatibility with traditional Windows software, like full support for Microsoft Office. He said the Surface Pro has the potential to slow adoption of Apple's iPad in the enterprise, but even that would be the best-case scenario for Microsoft, in his view.

"In such a scenario, Microsoft will be swimming upstream against the consumerization of IT trend with a heavier, bulkier and more expensive product," Whitmore wrote.

He projects total tablet shipments in 2012 will reach 97 million units, growing to 124 million in 2013. He sees iPad sales exceeding 60 million this year, and growing to 74 million in 2014.

Projections from Deutsche Bank call for Apple to maintain between 60 and 65 percent of the tablet market, while Surface RT and Android tablets will struggle to gain traction.
post #2 of 210


Well, Sinosfski did say that the Pro would be priced to be competitive with the ultrabook segment. To make this work, it's unlikely MS will release Office for iPad.

post #3 of 210

If they match price, and bundle Office, it may have a chance.  Or maybe they could make an OS for the iPad..
 

post #4 of 210

Microsoft is creating a very nice eco system, if they get a long term vision and not starting to make the windows 8 app signature bullshit and so on, maybe they have a chance, right now Android is the King, Apple is slowly loosing to Google, and the new OS Mountain Lion don't give much to already called Mac OS X Vista - Lion.

 

About the prices Microsoft has an advantage here, since Apple only knows expensive word, and Microsoft is know to Make 10 versions of the "same" operating system, so that will be the same with tablets, since Nokia will sell Windows 8 Tablets!! 

 

I do think we are always thinking Apple is the best and greatest, but if we see the last numbers, stock markets and iPhones/Macs sell, things are not looking so good as once did.

post #5 of 210
Quote:
Originally Posted by ankleskater View Post


Well, Sinosfski did say that the Pro would be priced to be competitive with the ultrabook segment. To make this work, it's unlikely MS will release Office for iPad.

That is another dilemma for Microsoft.  Will they make more money selling their pro tablet than they would if they sold millions of copies of Office for iPad?

post #6 of 210

What if the price to compete with the Air?  Too me, it seems the surface will compete in that market with tablet as a secondary.  I, right now am torn between a new tablet or a ultrabook.  At home I love the simplicity of my iPad 1st Gen but on the road I need horsepower.  This may be right up my road and I see not having to own two devices which would cost me around $2000.
 

post #7 of 210

I think the Pro would be more appropriately compared to the Macbook Air at $999.  But who know if MS will be able to even match that price.

post #8 of 210
Quote:
Originally Posted by SaltWater View Post

Microsoft is creating a very nice eco system, if they get a long term vision and not starting to make the windows 8 app signature bullshit and so on, maybe they have a chance, right now Android is the King, Apple is slowly loosing to Google, and the new OS Mountain Lion don't give much to already called Mac OS X Vista - Lion.

 

About the prices Microsoft has an advantage here, since Apple only knows expensive word, and Microsoft is know to Make 10 versions of the "same" operating system, so that will be the same with tablets, since Nokia will sell Windows 8 Tablets!! 

 

I do think we are always thinking Apple is the best and greatest, but if we see the last numbers, stock markets and iPhones/Macs sell, things are not looking so good as once did.

 

Do they serve cake in your dimension?

 

I could really go for some alternate reality cheesecake. Before I wake up.

post #9 of 210
Nice trolling. Take your BS somewhere else.
post #10 of 210

Apple will need to step up its game if it wants to compete with the Surface Pro. It should consider attaching a keyboard to the iPad, allow it to run a full desktop OS (OS X maybe?), provide USB and miniDisplay ports, a trackpad, and a swivel-like display. They should give it a name that connotes light weight, such as Oxygen or Feather, maybe even Air. 

post #11 of 210
Quote:
Originally Posted by hexor View Post

I think the Pro would be more appropriately compared to the Macbook Air at $999.  But who know if MS will be able to even match that price.

I agree.  While the table feature is nice, the selection of advanced software makes it more of a competitor to the Air than the iPad.  The Air can be had for a very good price these days.  MS really needs to at least match the Air in price.  If they can beat the price, then they may have a winner.

post #12 of 210

Things we don't know about the Surface: Does the intel version of the Surface have an optical drive? If not, how would you existing programs on it. Will you have to buy it again from the Metro Appstore? Will it be limited to 64GB as well? How can you have a full-fledge PC in this day and age with 64GB? What's the battery life?

 

There are too many unanswered questions.

post #13 of 210

it is amusing to see, nowadays, a large company like Microsoft run by amateurs.

 

Every professional in the planet would see, without beginning a whole tablet division, that the low price versus high quality is one of the key points nobody can displace Apple from their current #1 position. 

 

Apple invests in manufacture methods and technology to reduce production cost. Apple buys components by the trucks and have large discounts- they buy so many components that they can almost say how much they want to pay for a given component and the vendor will accept, because the profit is on the monumental volume.

 

Just an amateur would prepare a product for the market without having a strategy. They are so amateur their tablet crash on the presentation to the press... hahaha

 

Conclusion: the tablet is already a flop and will go nowhere and Steve is laughing beyond the grave.

post #14 of 210
Quote:
Originally Posted by jungmark View Post

Things we don't know about the Surface: Does the intel version of the Surface have an optical drive? If not, how would you existing programs on it. Will you have to buy it again from the Metro Appstore? Will it be limited to 64GB as well? How can you have a full-fledge PC in this day and age with 64GB? What's the battery life?

 

There are too many unanswered questions.

The Surface has a USB port, so there's your solution to getting CD/DVD-based software onto it.

post #15 of 210

People who use Windows and people who buy PC's tend for the most part to be cheap. MS is going to have trouble moving tablets at a price point that is too much for these cheap people to pay.

post #16 of 210

That chart states MS would have to include $90 for the OS in a surface tablet yet stating Apple doesn't have to for the iPad. Why? It is MS's baby, as the iPad is Apple's, so that info is inaccurate. Also, the line that includes "other" tacks on another $12 with no explanation.

 

Until this data is updated correctly, it is totally invalid.

post #17 of 210
Quote:
Originally Posted by macinthe408 View Post

Apple will need to step up its game if it wants to compete with the Surface Pro. It should consider attaching a keyboard to the iPad, allow it to run a full desktop OS (OS X maybe?), provide USB and miniDisplay ports, a trackpad, and a swivel-like display. They should give it a name that connotes light weight, such as Oxygen or Feather, maybe even Air. 
Hey I like that. MacBook Air has a nice ring to it.
post #18 of 210
Quote:
Still, Whitmore believes Surface models running Windows 8 are more likely to find success because they offer backwards compatibility with traditional Windows software, like full support for Microsoft Office.

If you're going to buy a Surface Pro for the backwards compatibility with traditional Windows software, than you need to have a keyboard, mouse/trackpad, and more power for the Intel chip. So, why not buy an ultrabook or notebook, and dispense with this kitschy click in the keyboard / kickstand contraption? I guess the MS touts are desperate to buy into this Ballmer dog and pony show.
post #19 of 210
Quote:
Originally Posted by jungmark View Post

Things we don't know about the Surface: Does the intel version of the Surface have an optical drive? If not, how would you existing programs on it. Will you have to buy it again from the Metro Appstore? Will it be limited to 64GB as well? How can you have a full-fledge PC in this day and age with 64GB? What's the battery life?

 

There are too many unanswered questions.

 

Both Surface RT and Pro support USB (2.0 for the RT, 3.0 for Pro).

 

Why include an optical drive inside? It is peripheral, and should be external.

post #20 of 210
Quote:
Originally Posted by Apple ][ View Post

People who use Windows and people who buys PC's tend for the most part to be cheap. MS is going to have trouble moving tablets at a price point that is too much for these cheap people to pay.

BS. Most people I know with who use Windows have high-end systems (both laptops and desktops).  If you want to state that people who don't want to spend a lot of money buy low-cost PCs, that is fine, but your blanket statement is worthless. So are all people who buy Mac Minis for the most part cheap?

post #21 of 210
Quote:
Originally Posted by macinthe408 View Post

Apple will need to step up its game if it wants to compete with the Surface Pro. It should consider attaching a keyboard to the iPad, allow it to run a full desktop OS (OS X maybe?), provide USB and miniDisplay ports, a trackpad, and a swivel-like display. They should give it a name that connotes light weight, such as Oxygen or Feather, maybe even Air. 


Apple might just listen to you and do this, but I bet they ditch the cellular radio.

post #22 of 210
I'm looking for a tablet PC that can do more.
 
I've held off on a laptop, and the Surface Pro looks about right. I've decided to wait, rather than getting a 2200 MBP w. Retina, or an iPad.
post #23 of 210

Pricing structure is incorrect!

The price estimate for a "surface table" as the title implies are incorrect making the entire article flawed.  Microsoft is the OEM therefore why would they have to pay $90 for their own software.  So add $90 of profit to each of those estimates to get a more accurate picture. 

post #24 of 210

I'm confused. Analysts are able to think, and come to logical conclusions ?

post #25 of 210

Tomorrow Apple will begin talking about an iPad pro that runs OSX and all applications that run on OSX. It will be available in the first calendar quarter of 2013. They don't have an actual running sample just yet but Apple is promising that it will run 3 times faster than any current laptop and the screen will magically grow to 27" at the press of a button.

 

Oh wait... sorry... that was just a day dream... eerily similar to the one Ballmer had last week.
 

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post #26 of 210
Quote:
Originally Posted by markbyrn View Post


If you're going to buy a Surface Pro for the backwards compatibility with traditional Windows software, than you need to have a keyboard, mouse/trackpad, and more power for the Intel chip. So, why not buy an ultrabook or notebook, and dispense with this kitschy click in the keyboard / kickstand contraption? I guess the MS touts are desperate to buy into this Ballmer dog and pony show.

Because you can have a device that acts like a tablet and a desktop/laptop. Most people who buy a Surface Pro and plan on using it as a desktop as well (me) already have a keyboard, mouse and monitor. Really no different than someone who buys a Mac Mini....already owning that extras. 

post #27 of 210
Quote:
Originally Posted by AppleInsider View Post


Still, Whitmore believes Surface models running Windows 8 are more likely to find success because they offer backwards compatibility with traditional Windows software, like full support for Microsoft Office. 

 

There is an error here.  All Surface tablets will be running Windows 8, but not all will be fully backwards compatible.    I suggest the author changes the sentence to only refer to Windows 8 x86 tablets.

post #28 of 210
Quote:
Originally Posted by lamewing View Post

That chart states MS would have to include $90 for the OS in a surface tablet yet stating Apple doesn't have to for the iPad. Why? It is MS's baby, as the iPad is Apple's, so that info is inaccurate. Also, the line that includes "other" tacks on another $12 with no explanation.

 

Until this data is updated correctly, it is totally invalid.

 

Yeah, there is a cost for the OS on the iPad side as well. A lot of this cost is shared with the iPhone/iPod touch/Apple TV development. Even ignoring these, the iPad is selling around 40 million devices a year. How much is Apple spending on iOS development? $100m/yr? $400m/yr? If the latter, then we're talking $10/device. Add in the iPhones, etc, and the cost is practically negligible.

 

Windows RT is a special build that will only be used on Windows RT tablets. However a lot of technology is shared with Windows Phone 8 and Windows 8. Microsoft has probably spent a few hundred million dollars on the combined development of Windows 8/RT/WP8, if not billions. How many devices will they sell? Let's assume a massive 10 million. And then we have Office RT on top. $90/device is probably not a bad estimate of development costs for the platform.

 

Therefore it's quite fair to have $0 in the Apple column, and $90 in the Microsoft column. Maybe the Apple column should be $2-$5...

post #29 of 210
Quote:
Originally Posted by lamewing View Post

That chart states MS would have to include $90 for the OS in a surface tablet yet stating Apple doesn't have to for the iPad. Why? It is MS's baby, as the iPad is Apple's, so that info is inaccurate. Also, the line that includes "other" tacks on another $12 with no explanation.

 

Until this data is updated correctly, it is totally invalid.

 

Was just about to point that out. Makes no sense. My assumption is that a similar spec'd tablet like surface made by Dell, HP, ASUS etc would cost that much but even still, it's just guessing. 

I'm not a pessimist. I'm an optimist, with experience.
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I'm not a pessimist. I'm an optimist, with experience.
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post #30 of 210
Quote:
Originally Posted by SaltWater View Post

Microsoft is creating a very nice eco system, if they get a long term vision and not starting to make the windows 8 app signature bullshit and so on, maybe they have a chance, right now Android is the King, Apple is slowly loosing to Google, and the new OS Mountain Lion don't give much to already called Mac OS X Vista - Lion.

 

About the prices Microsoft has an advantage here, since Apple only knows expensive word, and Microsoft is know to Make 10 versions of the "same" operating system, so that will be the same with tablets, since Nokia will sell Windows 8 Tablets!! 

 

I do think we are always thinking Apple is the best and greatest, but if we see the last numbers, stock markets and iPhones/Macs sell, things are not looking so good as once did.

 

I doubt you can substantiate anything you said.

 

Microsoft EcoSystem vs Apple Ecosystem  -  Fiction vs Reality

Apple losing to Google  -  In what reality are you speaking?  Surely not the reality of what is actually happening in the market.

Pricing  - Apple prices do not seem to affect any sales.  They seem to set record sales quarter after quarter. ($$$ and quantity)

 

Microsoft has yet to prove themselves in this market so save some cake for later.

post #31 of 210
The Surface is vapor at this point, so there is no way to answer any questions about it. If someone wants a Windows Tablet/laptop hybrid today they can buy a Lenovo X230t price , but at a price of around $1200-1600 for the Lenovo, the Macbook Air is better and a better buy. Windows tablets have been around for a decade and no one buys them. Why would anyone expect anything different with this new, non-existent version? Is anyone buying Ultrabooks? Why can't MSFT come up with something unique rather than just a clone of an Apple product?
post #32 of 210
Quote:
Originally Posted by Quadra 610 View Post

 

Do they serve cake in your dimension?

 

I could really go for some alternate reality cheesecake. Before I wake up.

 

+++ LOL

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post #33 of 210
Quote:
Originally Posted by lamewing View Post

BS. Most people I know with who use Windows have high-end systems (both laptops and desktops).  If you want to state that people who don't want to spend a lot of money buy low-cost PCs, that is fine, but your blanket statement is worthless. So are all people who buy Mac Minis for the most part cheap?

Just because you know a few people who might have high end systems doesn't change the statistics. The vast majority of people using Windows are on crap machines. Apple owns the high end consumer market.

post #34 of 210
Quote:
Originally Posted by SaltWater View Post

Microsoft is creating a very nice eco system, if they get a long term vision and not starting to make the windows 8 app signature bullshit and so on, maybe they have a chance, right now Android is the King, Apple is slowly loosing to Google, and the new OS Mountain Lion don't give much to already called Mac OS X Vista - Lion.

 

About the prices Microsoft has an advantage here, since Apple only knows expensive word, and Microsoft is know to Make 10 versions of the "same" operating system, so that will be the same with tablets, since Nokia will sell Windows 8 Tablets!! 

 

I do think we are always thinking Apple is the best and greatest, but if we see the last numbers, stock markets and iPhones/Macs sell, things are not looking so good as once did.


Android is the King?  What planet do you live on?

post #35 of 210
Quote:
Originally Posted by Purge View Post
 

Can you even use that thing on your lap like a regular laptop?

 

Whatcha gonna do, put the kickstand in between your knees, while you're typing on that sub standard and grotesquely colored keyboard? It looks like it is meant to only be used on a table.

post #36 of 210
Quote:
Originally Posted by thataveragejoe View Post

Quote:
Originally Posted by lamewing View Post

That chart states MS would have to include $90 for the OS in a surface tablet yet stating Apple doesn't have to for the iPad. Why? It is MS's baby, as the iPad is Apple's, so that info is inaccurate. Also, the line that includes "other" tacks on another $12 with no explanation.

 

Until this data is updated correctly, it is totally invalid.

 

Was just about to point that out. Makes no sense. My assumption is that a similar spec'd tablet like surface made by Dell, HP, ASUS etc would cost that much but even still, it's just guessing. 


The chart isn't Microsoft's costs, it's 3rd party OEM costs.  Third party manufacturers will have to pay MS a licensing fee.

post #37 of 210
Quote:
Originally Posted by jungmark View Post

Things we don't know about the Surface: Does the intel version of the Surface have an optical drive? If not, how would you existing programs on it. Will you have to buy it again from the Metro Appstore? Will it be limited to 64GB as well? How can you have a full-fledge PC in this day and age with 64GB? What's the battery life?

 

There are too many unanswered questions.

 

...and a lot of unquestioned answers ;)>

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post #38 of 210
Quote:
Originally Posted by dpriceslc View Post


Android is the King?  What planet do you live on?

Android is indeed the king. Android is the king of failed tablets, mega flops and firesales. Android is also the king of malware and fragmentation.

post #39 of 210
Quote:
Originally Posted by SaltWater View Post

…Apple is slowly loosing to Google…

Loosing the hounds.
Quote:
and the new OS Mountain Lion don't give much to already called Mac OS X Vista - Lion.

I wanted to pretend you hit a milestone for trolling, but I haven't been keeping track of the number of trolls.
Quote:
…Nokia will sell Windows 8 Tablets!! 

Nokia will be bankrupt before that happens.
Quote:
…if we see the last numbers, stock markets and iPhones/Macs sell, things are not looking so good as once did.

Record revenue, record profits, and record sales sure are a sign of bad times ahead. I guess you're one of those analysts that keeps saying "sell" for Apple.

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Even if [the 5.5” iPhone exists], it doesn’t deserve to.
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Originally posted by Marvin

Even if [the 5.5” iPhone exists], it doesn’t deserve to.
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post #40 of 210
Quote:
Originally Posted by Apple ][ View Post

Can you even use that thing on your lap like a regular laptop?

 

Whatcha gonna do, put the kickstand in between your knees, while you're typing on that sub standard and grotesquely colored keyboard? It looks like it is meant to only be used on a table.

 

The market is now wide open to develop an holder for the Pro version to snap into that makes it resemble an regular laptop.

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