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Microsoft Surface RT pricing 'aggressive and mystifying'

Microsoft Surface RT pricing 'aggressive and mystifying'

Analysts say Microsoft has missed opportunity to expand tablet market by taking game to Apple and the iPad

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Microsoft's pricing of its Surface RT tablet was called "aggressive" by some analysts yesterday, "mystifying" by others, even as they all remained skeptical that it's low enough to make inroads on the dominant player, Apple's iPad.

"It's an aggressive price, especially compared to the prices of the RT devices from their OEM partners," said Tom Mainelli of IDC. "But I'm not sure it's aggressive enough, when you consider that one of the big draws of Surface is that slick keyboard and it's going to cost an extra £80 or more."


"This is aggressive and right where it needs to be priced," echoed Patrick Moorhead, principal analyst at Moor Insights & Strategy.

Microsoft has started taking pre-orders for the Surface tablet running Windows RT, with prices starting at £399 for a 10.6-in. display and 32GB of storage. The entry-level model omits the Touch Cover, a cover-cum-keyboard that Microsoft has heavily promoted in the months since it unveiled its first-ever home-grown tablet.

The Surface RT also comes in a £479 configuration that includes 32GB and a Touch Cover, and in a 64GB model with a cover for £559. Touch Covers will be available separately for £99, and the Type Cover, a slightly thicker keyboard with key travel more like that of a lightweight notebook, will be priced at £109.

Other analysts questioned those prices.

"I was hoping for $399," said Carolina Milanesi, an analyst with Gartner, in an interview today. "They believe the Office suite is enough to justify that premium, but they're late to the party. From the consumer standpoint, Office is not what will make you get a Surface RT."

The suite Milanesi referenced was Office Home and Student 2013 RT Preview, a four-app bundle of touch-enabled Word, Excel, PowerPoint and OneNote written for the "Modern" - formerly "Metro" - user interface (UI) on Windows RT.

Microsoft is including Office 2013 RT with all Windows RT-powered tablets and devices, its own Surface as well as ones designed and sold by its computer-making partners.

"But enterprises looking at Windows on a tablet will pick the x86 version, Windows 8, not Windows RT," Milanesi continued. "For enterprises, Office would be an advantage. Not for consumers."

Ezra Gottheil, an analyst with Technology Business Research who tracks mobile devices, including the Surface and Apple's iPad, was much more pessimistic about the Surface RT at today's prices.

"I can't figure this product out at all," said Gottheil. "I don't know what kind of impact Microsoft thinks it will have, but its only hope was to very aggressively priced."

And at $499 and up, the Surface RT didn't meet his definition of "aggressive." That would have required significantly smaller numbers of $350 or so.

"It just doesn't make a lot of sense. You can get a very good portable PC at these prices," said Gottheil. "Where it stands, it's hopeless."

The elephant in the room was Apple's iPad, the benchmark tablet for most experts and consumers. Apple sells the iPad at $499 for a 16GB model, $599 for 32GB and $699 for 64GB, all minus covers or keyboards. It also still offers a 16GB iPad 2, a 2011 model, for $399.

Some of the experts didn't shy from comparing prices of the Surface RT and the iPad, saying that consumers certainly would.

"The Surface RT is not a PC," said Milanesi, "or a PC replacement. So from consumers' perspectives, they will look at it and say, 'This is a tablet. What I know about tablets is that I know about the iPad.' So it may come down to a 'religious' perspective, with those considering the Surface RT people who would never buy an Apple product."

That's a relatively small market, she emphasised. "This is a very high-end position for someone coming late to the tablet party," Milanesi said. "The hardware is really good, but from a price perspective, they would have had a much bigger impact at $399."

Even IDC's Mainelli, who did tag the Surface RT's opening price as aggressive, worried that Microsoft blew an opportunity.

"At $500 for the whole package I think a lot of people would pull the trigger but at $600 it's a harder sale, especially with the current lack of RT apps," Mainelli said, talking about the $499 Surface RT sans a Touch Cover and the $599 model with one.

Microsoft, of course, has a partner ecosystem it has to keep in mind, something Apple, Google, Amazon and other tablet makers do not. That may have contributed to the pricing decisions Microsoft made, said Milanesi.

"On the plus side, these prices are good for the partners," she said of the room they may have to compete with the Surface RT, or even undercut it. "Microsoft had to price the Surface RT only to sell enough. They cannot flop, they have to show some traction. That's why I still think the Surface RT is a marketing tool for them, a way to display Windows."

Gottheil, however, remained unconvinced that Microsoft's pricing strategy was smart, or that it even had a strategy. "It's going to be very hard to explain the value proposition to consumers," he said. "The one hope they had was to show good price-performance."

So who will buy a Surface RT at these prices?

"It's not going to be bought by someone who would buy an iPad, or even an Android tablet," Gottheil argued. "I think it's for a very specific market: consumers who have a primary PC, want a tablet, and for whom Office is very important. But it's not even clear if Office will not be available on Android or iOS.

"I just don't see this a successful product concept at this point," Gottheil concluded. "It's always been a problem child. It's poorly defined and poorly positioned. It would be a mystifying product even at a considerably lower price."

Customers in eight countries - Australia, Canada, China, France, Germany, Hong Kong, the UK and US - can pre-order a Surface RT from Microsoft's online store, which today promised delivery by October 26.

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Comments

  • Lysle Shaw-McMinn I may be in minority but office multi-tasking and keyboard solution is the primary reason why ipad is useless to me and why I will be getting a windows RT8 tablet this year I think this article is wrong to dismiss office It and features like it are what makes microsoft devices productivity powerhouses where apple products are toys I dont say that with contempt I own apple stock
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