Microsoft’s Surface Costs $266 More Than Its Parts Added Up

Those teardown-and-cost-estimation whizzes over at iSuppli have torn apart Microsoft’s new hero device, and it looks like Microsoft has baked in a healthy profit margin into ever Surface sold. The least expensive Surface starts at $500 and comes with 32GB of NAND flash. If you want a Touch Cover (and you want a Touch Cover) the total comes up to a cool $600. However, the total cost of materials, according to IHS is only $284. Amazon and Google may be barely breaking even with their tablets, but Microsoft’s is firmly in Apple’s profit-up-front camp. In fact, the Microsoft Surface RT is more profitable than the iPad, not counting marketing and R&D costs. While Microsoft’s Windows 8 may be fighting for market share at the moment, it’s clear that Microsoft isn’t playing the same game as Google and Amazon.  Their strategy consists of grabbing as much market share as possible. Microsoft, on the other hand, is selling the Surface at a clear value-added price: the combination of components in the Surface is secondary to the gestalt and user experience, as opposed to the Kindle HD or Nexus 7, which puts an emphasis on cheap cutting-edge components. Whether you love or hate the Surface–we like it–you’ve got to admit that in terms of components for your dollar, the Surface isn’t the best bargain.

Also, the x86-compatible big brother of the Surface, the Surface Pro, was briefly put up for pre-order on a German website. The price? A mere €680 for the starting model. Of course, when technology crosses borders you can’t count on direct currency exchange rates, but this seems to indicate to me (if it is in fact a genuine price) that when the Pro hits American shores, it won’t be as crazy expensive as it could be.


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