Among the many unanswered questions we have about Microsoft’s upcoming Surface tablets is the pricing: Where will these devices plug in to the competitive landscape? Will they offer a compelling alternative, financially, to the Apple iPad? This weekend, Microsoft CEO Steve Ballmer finally offered the first clues to how Microsoft will price these eagerly awaited devices.
Mr. Ballmer told the Seattle Times that Surface pricing would align with the “sweet spot” of traditional PCs. This suggests that the Surface devices will cost roughly the same as Apple’s iPad, which at $500 to $830 is pricey for a device that’s not as sophisticated as a PC.
“If you look at the bulk of the PC market, it would run between, say, probably $300 to about $700 or $800,” Ballmer noted. “That's the sweet spot.”
That price range is well below the price range for the ARM-based Windows RT devices that Microsoft’s partners will make. According to internal documentation I obtained, Microsoft’s partners were planning as recently as last month to price their own Windows RT-based devices at the same price range as the iPad, at about $500 to $800. Windows 8-based devices would presumably run the gamut to higher prices, as do PCs today.
(Microsoft will sell two versions of its Surface tablets. The first, called Surface RT, will debut on October 26 and run Windows RT, the ARM-based version of Windows 8. The more full-featured Surface tablets, running Windows 8, will debut in early 2013.)
Ballmer discounted 7" tablets as productivity machines. “If you say to somebody, would you use one of the 7" tablets, would somebody ever use a Kindle [Fire] to do their homework?” he said. “The answer is no, you never would. It's just not a good enough product. It doesn't mean you might not read a book on it.”
More important, Ballmer discounted the pricing model of these 7" devices. Google’s Nexus 7 starts at $199, as does Amazon’s Kindle Fire HD lineup. But these smaller devices “look less good, [are] chintzier, [and] cheaper,” according to Ballmer. In other words, the Surface won’t compete with $200 Android devices. This suggests that rumors of a subsidized $200 Surface are a fantasy, as I previously reported.
As for the Surface tablets’ potential success in the market, Ballmer is more bullish about Windows 8 than he is about the devices. Windows 8, he says, “is going to do great [and] will propel a volume of close to 400 million PCs sold in the next year.” But with the Surface, he’s not so sure. “We'll have to see whether Surface is a success or not because we haven't shipped any yet,” he said. “But it certainly has the elements of success.”