Opinion Brief

Microsoft's plan to sell the Surface tablet for only $199: Bad idea?

A new report says that the price of the game-changing slab will drastically undercut the iPad, fueling sales — but at what cost to Microsoft?

When Microsoft unveiled the Surface in June, it pulled off a rare feat in the crowded tablet space: Generating actual excitement. Noting the gadget's removable cover that cleverly doubled as a keyboard and its ultra-stylish new version of Windows OS, tech pundits sighed with relief, persuaded that a viable alternative to the iPad had finally arrived. Many expected the Surface to sell in the iPad's price range of $500 to $600 (one Swedish website even projected a $1,000-plus price tag). But a new Engadget report suggests that Microsoft is planning to sell the high-end slab for a ludicrously low $199, on par with budget tablets like Google's Nexus 7 and Amazon's Kindle Fire. Microsoft would likely lose money on each device, but gain speedier market penetration. Is that a strategic trade-off?

It is, if the goal is to spur developer interest: Such an aggressive price tag could earn Microsoft some "significant market share," says Tony Bradley at PC World. And quickly amassing a large audience would definitely "fuel developer interest," which is key to becoming a major and enduring player. As history's shown us, a large selection of third-party apps means more "adoption by businesses and consumers." The problem is, if you start at $199, "customers might balk at higher prices down the road."
"Microsoft Surface could be a huge hit at $199"

Microsoft may have no choice: Pricing the Surface that low "might make sense" because Microsoft is showing up "very late to the tablet market that is already well-stacked," says Brad Reed at BGR. Consumers have been trained to accept the $200 price point, and Microsoft understands that it needs to "positively blow the market away" just to catch up to Apple or Google. A high-end device with a low-end price tag might do just that.
"Microsoft Surface Windows RT tablet reportedly priced at just $199"

It's a terrible idea: When Microsoft announced it was building its own in-house tablet, the news strained its relationships with Original Equipment Manufacturers [OEMs] like Acer who've licensed Windows OS for their own tablets, says Peter Bright at Ars Technica. Outpricing partners with a heavily subsidized machine would further unravel those relationships, which Microsoft still needs to make Windows the new standard. As it stands, the company lacks the manufacturing might to churn out millions of Windows machines on its own. And with "no means to effectively compete with Microsoft, other tablet manufacturers would likely switch to, or stick with, Android."
"How Microsoft could make a $199 Surface RT a reality, and why it shouldn't"

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