Surface's high profit margin reveals Microsoft's ape-Apple strategy

New Windows RT tablet's 53% margin higher than any full-sized iPad, says IHS iSuppli

By , Computerworld |  Consumerization of IT, Microsoft, Microsoft Surface

He applauded Microsoft's business acumen, noting that the addition of the Touch Cover lets the company charge an extra $100 -- what he called "a very healthy upgrade" -- and gives it an additional upsell tactic beyond the usual memory upgrades that Apple popularized in tablets.

The Surface's large margin also gives Microsoft plenty of maneuvering room down the road, just as the high margins on the iPad Mini provide Apple pricing alternatives.

"They came to the conclusion that they didn't have to give away the Surface, but if [the current pricing] doesn't work, they have room to drop it, or even subsidize it," said Rassweiler.

Singh again disagreed, reiterating his take that there was less room than the numbers indicated because of pressure on Microsoft from its OEM partners to give them ways to meet or even beat the Surface RT's price.

"I think this is a test of sorts," countered Rassweiler, echoing what others have said of Surface RT pricing. "They'll see how this works. Only time will tell."

Gregg Keizer covers Microsoft, security issues, Apple, Web browsers and general technology breaking news for Computerworld. Follow Gregg on Twitter at @gkeizer, on Google+ or subscribe to Gregg's RSS feed. His email address is gkeizer@computerworld.com.

See more by Gregg Keizer on Computerworld.com.

Read more about tablets in Computerworld's Tablets Topic Center.


Originally published on Computerworld |  Click here to read the original story.
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