Microsoft’s foray in the tablet market with an ARM-based (Tegra 3) device starts on Oct 26, and Microsoft has told us during the launch in Los Angeles that the device would be priced “competitively” to the “market leader” (iPad) – most people assumed that Microsoft was thinking of a $399-$499 range. However, based on alleged Insider information, tech blog Engadget says that a $199 price is in the works, if “everything go according to the plan” which was apparently detailed by Microsoft during TechReady15.
That price would effectively mean that Microsoft is going to subsidize the tablet as it is impossible to produce+sell it with a profit at that price level. For reference, Ubergizmo estimates that ASUS makes a $3 to $4 profit on each Nexus 7 tablet, which uses a similar Tegra 3 chip, but has significantly cheaper battery, a much smaller screen and overall material.
This is a business model that Microsoft knows well: its Xbox 360 console initially lost money on the hardware only to make it profitable on the game sales. However, this is a very different business, and chances are that the lifespan of the Surface for Windows RT tablet (18 months vs. 7 years for the 360) won’t allow Microsoft to make the money back. If this $199 is true, I would see it more like an move by Microsoft to expose customers to Windows 8 RT – but without a real chance to make their money back.
That seems a bit too good to be true, but we’ll have to wait and see. Microsoft has a lot of cash, and how they use it can be a mystery. Surface RT for $199? I’ll take two!