Microsoft faces 'major dilemma' pricing Surface tablets against iPad

Posted:
in iPad edited January 2014
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.
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Comments

  • Reply 1 of 209
    ankleskaterankleskater Posts: 1,287member




    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.

  • Reply 2 of 209
    elmsleyelmsley Posts: 120member


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

     

  • Reply 3 of 209


    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.

  • Reply 4 of 209
    quinneyquinney Posts: 2,524member

    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?

  • Reply 5 of 209
    hellacoolhellacool Posts: 759member


    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.

     

  • Reply 6 of 209
    hexorhexor Posts: 57member


    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.

  • Reply 7 of 209
    quadra 610quadra 610 Posts: 6,743member

    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.

  • Reply 8 of 209
    Nice trolling. Take your BS somewhere else.
  • Reply 9 of 209
    macinthe408macinthe408 Posts: 1,050member


    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. 

  • Reply 10 of 209

    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.

  • Reply 11 of 209
    jungmarkjungmark Posts: 6,664member


    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.

  • Reply 12 of 209


    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.

  • Reply 13 of 209
    timuscatimusca Posts: 120member

    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.

  • Reply 14 of 209
    apple ][apple ][ Posts: 8,436member


    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.

  • Reply 15 of 209
    lamewinglamewing Posts: 742member


    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.

  • Reply 16 of 209
    rogifanrogifan Posts: 10,669member
    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.
  • Reply 17 of 209
    markbyrnmarkbyrn Posts: 606member
    [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.[/quote]

    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.
  • Reply 18 of 209
    purgepurge Posts: 3member

    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.

  • Reply 19 of 209
    lamewinglamewing Posts: 742member

    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?

  • Reply 20 of 209
    cityguidecityguide Posts: 129member

    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.

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