Aggressive pricing seen as key to Microsoft Surface's chance of success

Posted:
in iPad edited January 2014
Microsoft's new ARM-based Surface tablet will likely need to undercut the price of Apple's iPad in order to have a fair chance in the marketplace, analysts believe.

Shaw Wu with Sterne Agee said in a note to investors on Tuesday that Microsoft will need to price its ARM-based Surface close to, or even below, Amazon's $199 Kindle Fire. The risk would be Microsoft taking a loss on the hardware, as Research in Motion has done with the PlayBook and HP did to sell off TouchPad inventory.

Separately, Brian White with Topeka Capital Markets also believes Surface "will need a healthy price discount to the iPad" if Microsoft hopes to gain traction. He said Microsoft will likely have a difficult time undercutting the iPad, since Apple's iPad 2 is priced at just $399.

In addition, White also believes that Apple could release a smaller, so-called "iPad mini" this September at a price point between $250 and $300. That would make it even more difficult for competitors like Microsoft to undercut Apple, and would also open up the iPad to a new market segment.

Wu noted that Microsoft's press conference, held in Hollywood on Monday, was very Apple-like in its presentation. He sees it as a positive that Microsoft is being more proactive in addressing the mobile device market where it has had little traction, but also noted the Surface will cannibalize Windows partners like Dell, HP, Acer, and Lenovo.

Surface 1


Industry sources who spoke with Wu indicated that one of the reasons Microsoft has decided to take more control and produce its own hardware is the lackluster results Nokia has had selling devices based on the Windows Phone platform.

"Despite heavy promotion and advertising and carrier desire to have a viable alternative to Android and iOS, Windows Phone 7 has found disappointing customer acceptance," Wu wrote.

To White, Monday's event was a clear sign that Microsoft is looking to find its identity in the post-PC era. He said that Microsoft's decision to control both hardware and software in creating the Surface was "the sincerest form of flattery to Apple."

In White's view, the ARM-based Surface tablet will be more of a threat to the Android ecosystem than Apple's iPad. And he thinks the Windows 8 Pro Surface tablets, featuring Intel processors, could have a place in "certain parts of the enterprise world." But he said Monday's presentation gave him no reason to think most consumers would prefer Surface over an iPad.
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Comments

  • Reply 1 of 128
    gtrgtr Posts: 3,231member


    Microsoft themselves quoted this as being 'around about ultra book' pricing levels. That's one damn expensive tablet.


     


    I noticed that, although Microsoft tried to make the keynote 'Apple-like' the thing was very poorly done. The Surface shitting itself in the first few minutes of the demonstration didn't impress many either.


     


    I did like some of the ideas they've implemented, and kudos to them for not doing an outright Samsung, but it may not be enough.


     


    Time will tell.

  • Reply 2 of 128
    quadra 610quadra 610 Posts: 6,741member


    An inconvenient tablet.


    An inconvenient laptop.


    It runs Windows. 


     


    Remember the re-branded Toshiba Gigabeat MS called the Zune?


    This is a re-branded Acer Iconia. It's been done before. Consumers didn't really go crazy over the idea. This thing will be dead and buried in two years. 


     


    MS had a chance, like everyone else, to change the game completely. As with Windows Phone, they didn't. It's just . . . adequate. Which is hardly enough in this market. 


     


    You can make it dirt cheap. MS still won't be able to move enough of these things to make the effort worth it. 

  • Reply 3 of 128
    shogunshogun Posts: 360member
    Most people will want to take a look, at least.

    I think there's no chance in h377 the Surface (aka serve-us) will sell for $199. --that's instinct, not industry knowledge. My guess would be $399 for the ARM and $699 start for the Pro.

    Microsoft doing hardware and software? I'm thinking that's hard to suddenly jump into. I'm not at all convinced this can be a home run. Something somewhere will be a screwup. Even if it's behind the scenes meaning they lose even more on the products than expected.

    But as a competitor I think this is a decent showing. It's not an iPad because iPad will destroy any wanna-be iPad. It's something different. It's thicker, hardware keyboard, sd card slot and USB. It has the kickstand and a new OS that is built for a different take on touch (inline android, which is the same take on a touch OS.).

    So this is good. It's a real fight (or will be when it actually ships). Whether Surface has much of a chance in the near term is highly questionable. But didn't they with Xbox buy their way in until they had learned lessons and gained traction? When you've got that much money and that much need, this is the best way to go for them.
  • Reply 4 of 128
    aaarrrggghaaarrrgggh Posts: 1,564member
    This will be fun to watch. If MS are licensing WinRT to OEMs for $90 and pricing the Surface at $200 the magic question is how much did RIM's value just go up to the Dells and Lenovos of the world? Will HP be smart enough to have made real progress on WebOS behind closed doors?

    There is nothing wrong with disruption, but if HP wasn't as ineffective as they have proven themselves to be time after time, I would expect a fantastic new office suite, messaging suite, and hardware-integrated servers to start being heavily marketed.

    I'm not sure Microsoft can keep the dominance this time around. The writing is on the walls for their partners...
  • Reply 5 of 128
    macxpressmacxpress Posts: 4,642member


    Its going to be like a box of chocolates...pretty on the outside but once you start to bite into the chocolate you realize it tastes like shit!

  • Reply 6 of 128
    xflarexflare Posts: 199member

    Quote:

    Originally Posted by GTR View Post


     


     


    The Surface shitting itself in the first few minutes of the demonstration didn't impress many either.


     


     



    LOL...It did what??? 

  • Reply 7 of 128
    hodarhodar Posts: 249member


    When you arrive ~3 years late to the party, with a different (and as of yet, unsupported) OS environment; you must accomplish 2 of the following 3 objectives.


     


    * Better


    * Faster


    * Cheaper


     


    If you can't hit 2 of these 3 targets - might as well close up shop and go home.

  • Reply 8 of 128
    mcarlingmcarling Posts: 1,106member


    In order to have a fair chance of success in the market, they'll have to dump MS Windows and run less crappy software like Symbian or Android.

  • Reply 9 of 128
    rattlhedrattlhed Posts: 105member


    I just don't get the 16:9 form factor.  It's so unattractive to me.  How do you use this thing for common web surfing?  Do you have it tall and skinny, or super wide and short?  It just seems like it would be a cumbersome way to view a web page properly.  If there is anything the iPad completely gets right, it's the size.  Just like a piece of paper, it's very useful landscape or portrait.  And when you watch a movie, you still get a nice wide screen display.  Sure there are black bars on the top and bottom that the Surface wouldn't have, but you're still getting the same amount of movie real-estate for the actual movie display.  Then when you go back to 99% of the other tasks you do, you have a much better form factor.


     


    The Surface isn't an epic fail, but I just don't see a big demand for this. Time will tell.

  • Reply 10 of 128
    If anything, what was striking about this prototype is how much Microsoft wants to *remain* in the PC world, not find a space in the "post PC" world.

    If anything, response among geeks has demostrated a long standing desire to replicate the desktop in a tablet, which explains the overused (and highly subjective) phrase of this being a "real" tablet where they can get "real" work done. (Strangely, no one has suggested how to load up all those "real" applications onto a tablet with no optical drive, Yes, of course there is wireless, but shouldn't a real tablet have an optical drive choice?)

    Of course, people are going to spend their money on what they want, and Microsoft has figured out their best bet is to remain firmly planted in the PC world.
  • Reply 11 of 128
    maccherrymaccherry Posts: 924member


    Complete BS!


    There are literally scores of $49.99 no name brand tablets on the market that will overshadow this surface tablet.


    MS is fooling themselves if they think that swanky POS is going to be a game changer. Somebody has been drinking the kool aid, again. Isn't there a 12 step program for foolishness like that?


    Their business model is under fire. The iPad is virus free, fast and does what the average computer user needs. MS wants us to buy big a** pc where most of the price is for their goddamn OS and intel's chips. The rest are dime a dozen parts.


    Surface=fail.

  • Reply 12 of 128
    maccherrymaccherry Posts: 924member


    The gold in your comment was that the iPad is useful in either portrait of landscape mode


    Absolutely brilliant!!!!


    That surface is some sh** MS whipped up just for the sake of showing something off. I bet you that crap won't see the light of day.


    MS will say that it wasn't really going to be sold as it is, but was an idea builder for OEMs. 

  • Reply 13 of 128
    maccherrymaccherry Posts: 924member


    You ain't lying. MS is a 500 pound orangutan. Very hard for them to get up and shift form a tried and true business model. But they better!The iPad is killing the pc sales. Apple shifted the paradigm. No other tech company would have done this. Now all hell is breaking loose as old business models are getting their asses beat down.

  • Reply 14 of 128
    The Surface doesn't need an optical drive. It will come preloaded with Microsoft's own App Store. Check the Windows 8 specs in Microsoft's website.
  • Reply 15 of 128
    thepixeldocthepixeldoc Posts: 2,257member

    Quote:

    Originally Posted by Elian Gonzalez View Post



    <snip>(Strangely, no one has suggested how to load up all those "real" applications onto a tablet with no optical drive, Yes, of course there is wireless, but shouldn't a real tablet have an optical drive choice?)<snip>


    Short answer: no.


    Although I am also surprised that MS didn't try to squeeze one in there. Optical drives are out, and will be gone by 2015... just about the time when MS gets this right with Windows 9,

  • Reply 16 of 128
    j1h15233j1h15233 Posts: 274member


    They can make it whatever price they want. What's important is the pricing and availability of anti virus software haha.

  • Reply 17 of 128

    Quote:

    Originally Posted by GTR View Post


    I noticed that, although Microsoft tried to make the keynote 'Apple-like' the thing was very poorly done. The Surface shitting itself in the first few minutes of the demonstration didn't impress many either.


     



     


    Yeah, nothing like ending the presentation with a slide with prices, followed by another that reads "SHIPPING TODAY". Guess Microsoft ain't got that down yet. They're trying to convince everyone that they have hardware chops by talking about the Microsoft Mouse? Really? Apple's been building computers since 1976, when Steve Jobs was making them BY HAND in his parents' garage. Microsoft wants you to think they've sweated the design and manufacturing details too, but they built a Ford, not a Ferrari.

  • Reply 18 of 128
    jdsonicejdsonice Posts: 156member

    Quote:

    Originally Posted by Hodar View Post


    When you arrive ~3 years late to the party, with a different (and as of yet, unsupported) OS environment; you must accomplish 2 of the following 3 objectives.


     


    * Better


    * Faster


    * Cheaper


     


    If you can't hit 2 of these 3 targets - might as well close up shop and go home.



    Exactly right. MS may make is cheap - take a loss for sometime and faster sometimes is a function of time - but BETTER that I think is THE key to this and unfortunately MS will have a hard time with that one.


     


    And it has to be more than vaporware.  I think MS would have gained some respect if they had announced a real date on which the product would be available. 


     


    What I see now is another tablet and another attempt to beat Apple. 

  • Reply 19 of 128
    jragostajragosta Posts: 10,473member
    <vc><strong>Microsoft's new ARM-based Surface tablet will likely need to undercut the price of Apple's iPad in order to have a fair chance in the marketplace, analysts believe.</strong>
    Shaw Wu with Sterne Agee said in a note to investors on Tuesday that Microsoft will need to price its ARM-based Surface close to, or even below, Amazon's $199 Kindle Fire. The risk would be Microsoft taking a loss on the hardware, as Research in Motion has done with the PlayBook and HP did to sell off TouchPad inventory.

    Yet another clueless comment from Wu. His history is one of the worst of all the analysts - and that's pretty bad.

    The TouchPad was priced at $400 - just below the iPad. The Playbook was originally $500 for the base model - same as the iPad. Both of them were dumped on the market when it was clear that they wouldn't sell and the manufacturer had to empty the shelves. Neither HP nor RIM set out to sell at those prices and it would be foolish to do so.

    Amazon is a different case. They are offering the unit at a deep discount from fair market price (possibly even low enough to lose money on the device) in order to gain a revenue stream from selling eBooks. Basically, the product is a razor and the eBooks are the blades. In addition, by many reports, the Fire is a somewhat limited tablet. It's not really comparable to the iPad or the upcoming Microsoft tablet.

    Microsoft would not obtain a recurring revenue stream from their tablet, so they have to sell it at a price where they can make money on the package. Now, if they are convinced that it would sell more PCs, then there might be some justification for cutting the price, but I can't see how that would work. It is very likely that the best price point would be between Fire and iPad. Exactly where the price needs to be depends on features and their costs.
    gtr wrote: »
    Microsoft themselves quoted this as being 'around about ultra book' pricing levels. That's one damn expensive tablet.

    I noticed that, although Microsoft tried to make the keynote 'Apple-like' the thing was very poorly done. The Surface shitting itself in the first few minutes of the demonstration didn't impress many either.

    I did like some of the ideas they've implemented, and kudos to them for not doing an outright Samsung, but it may not be enough.

    Time will tell.

    'Around Ultrabook' pricing would be far too high. I hope they come to their senses before launching the product. One of the key factors in setting price is that the iPad is widely perceived as the tablet to have. Everything else is seen as "the tablet to buy if you can't afford the iPad". There are exceptions - as a small number of people absolutely refuse to buy Apple products due to the kind of FUD that gets thrown around here all the time (and similar FUD from Apple haters everywhere else), but if you're going to pay $500-800 for a tablet, there are few real reasons to buy anything else.

    If they price it at Ultrabook levels, it will fail - immediately. If they price it somewhere below iPad levels, it has a chance- with the extent of that chance depending on the features and quality they bring to the table. Of course, there's always the possibility that Microsoft will offer something so overwhelmingly fantastic that it would justify a significant premium over the iPad, but that just doesn't seem likely.

    ETA:
    I just read some information about the tablet. It looks like "around Ultrabook pricing" applies to the Intel version - which will run regular Windows apps. That is a big enough advantage over the iPad that it is not out of the question. I could picture $800 for the Intel version and $400-450 for the ARM version. Not only does the Intel version run Windows apps, it also has a much better screen. So it's entirely plausible.
    maccherry wrote: »
    Complete BS!
    There are literally scores of $49.99 no name brand tablets on the market that will overshadow this surface tablet.

    Please name even one $49.99 tablet that is a quality device that is going to be better than Microsoft's tablet (which, of course, is impossible to do since you haven't seen Microsoft's tablet yet). Every $49 tablet I've seen is a POS with EXTREMELY limited capabilities and/or terrible build quality. I've got one of the best of the cheap tablets (list at $189, but actually sells for $70-90) which I got to play around with and for when I need to do something under extreme conditions and wouldn't want to risk an iPad. It's junk.
  • Reply 20 of 128
    scadesscades Posts: 35member

    Quote:

    Originally Posted by Suddenly Newton View Post

    ... but they built a Ford, not a Ferrari.


    An Edsel?

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