Microsoft's Surface RT pricing 'aggressive,' 'mystifying,' say analysts

Misses opportunity to expand tablet market, take it to Apple and its iPad

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

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 emphasized. "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."

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