First Prices for Microsoft's (MSFT) Surface Leak, Could Be Competitive

June 22, 2012 7:48 AM EDT Send to a Friend
Though we're not sure when the overused puns will end, pricing on Microsoft's (Nasdaq: MSFT) new tablets is getting less mysterious by the day.

According to reports out late Thursday, the entry cost to grab one of Microsoft's first tablet PCs has "surfaced," and it might leave some notable competition smiling.

Digitimes says supplier Pegatron assumed the price of the Windows 8 Pro-based Surface tablet PC will be above $799, while the Windows RT-based device will go for somewhere above $599. The Windows 8 version utilizes Intel's (Nasdaq: INTC) Ivy Bridge processor, while RT is run under an NVIDIA (Nasdaq: NVDA) Tegra 3 chip.

Though Microsoft's tablets might appeal to the enterprise crowd (who are probably already running a Windows-based setup), the higher prices might put devices out of reach for most consumers.

Sitting in the corner and smiling is obviously Apple (Nasdaq: AAPL), which sells its entry-level new iPad for $499 and older iPad 2 model at $399.

It should be noted Microsoft is assuming consumers and enterprise will evaluate specs on each model, placing the RT Surface closer to a mid-tier iPad. Most consumers will probably be more price-focused, regardless of the specs on a machine.

Digitimes called it a "risky" strategy by Microsoft, saying profits will be limited while is clients might be offended by the gesture. Given that Microsoft's a rather large company which relies mainly on distribution of higher-margin software for most of its profits, one would have to assume the company informed customers of its plans in advance. Companies like Hewlett-Packard (NYSE: HPQ), Dell (Nasdaq: DELL), Lenovo, and Acer have but one or two other options for operating systems: Google's (Nasdaq: GOOG) Chrome, UNIX, or Linux, of which 66 percent are not well known to the general public and thus not good for marketing.

Another aspect is whether or not the Surface line will end up with 3G or 4G compatibility. Should that happen, carriers like Verizon (NYSE: VZ), AT&T (NYSE: T), and Sprint (NYSE: S) are likely to subsidize some of the cost, bringing the price point down to a more manageable level for consumers.

We're not sure how many more chops Apple has left to lick, but imagine Tim Cook sitting in his gigantic CEO chair, leaning back and laughing maniacally. Probably. Meanwhile, unless Microsoft can pull together a smashing marketing strategy or lower-priced Surface, investors might have to go back to relying solely on dividend yield for near-term returns.

Shares of Microsoft are up slightly, as are Apple shares.


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