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How much should Microsoft really charge for a Surface Pro 2 tablet?

I have had a chance to take both the Surface Pro and Surface Pro 2 for test spins and I came away with a sense of respect for the job Microsoft did.

Considering that Microsoft wasn’t (at the time) a declared Products and Services company, the Surface Pro was a pretty decent effort. It was sleek, different, powerful and injected several new ideas into the mobile marketplace.

A Media Consumption Device

The Surface line of tablets were supposed to go right at Apple’s throat with the line that the fantasy love – “the iPad is just a media consumption device”. Unfortunately Microsoft screwed that whole line of attack up.

It was a real cluster$%$#.

  • First they flubbed supply and demand and couldn’t get them out to the stores on time. LINK
  • Then they had dumb ads showing people breakdancing and articulating zero corporate value. LINK
  • Then they had no docking stations and accessories ready for the first generation of tablets. LINK
  • Then they never explained what the heck Windows RT was and why people should buy the Surface. LINK
  • And to cap it all off, they had to take a write off for tons of tablets they never sold. LINK

On and on it went. I get migraines thinking about how bad that whole thing was bungled.

So then they had a much better rollout of the second gen units and things went better.

Stores like Best Buy have Microsoft sections in the retail outlets and the staff are FINALLY trying to sell these units. The tablets pretty much look the same but are fast as heck so performance improved over the first generation.

And finally, Microsoft finally got their marketing together and have started showing better and more targeted commercials. FINALLY.

What’s the value proposition of a Surface Pro 2?

So now that things are starting to stabilize, let’s talk about the value proposition.

According to Netmarketshare mobile OS stats for December of 2013, Apple and Android are fighting for close to 90% of the mobile market.

This is the market that Microsoft needs to penetrate and FAST.

In order for that to happen, we need to ask the question – what can a Surface Pro 2 do that an iPad or Android tablet cannot do or do as well?

Some parts of this are subjective but lets see how this goes…

The Surface is a true hybrid computer/tablet.

No BS, it actually does both and does them pretty well (irrespective of how I feel about Windows 8/Windows 8.1).

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It can run full processor taxing software apps like Adobe Photoshop really well and it’s a true multi-user computer (separate accounts and separate desktop worlds for each user). The iPad and Android tablets haven’t caught up in that respect.

Unfortunately, after you hit all the corporate/executive differences, the value prop starts to run out of steam. It is newer, has less apps for it, is more expensive, less developer interest at this point, runs Windows 8.x etc, it’s heavier etc..

It’s a mixed bag.. you can see some of the differences in my review of the Surface Pro 2 here.

What would you pay for a Microsoft Surface Pro 2?

I continue to maintain that Microsoft are in a little bit of a pickle here with the Pro line of Surface devices. I’ll never forget something that Paul Thurrot wrote last year.

In a piece titled “PC Makers Aren’t Learning From History”

He said:

Seven to eight years ago, in a last-ditch effort to jumpstart the dying Linux initiative on the PC desktop, PC makers began pushing a new kind of low-cost, low-capability PC that eventually became called netbooks. At first, netbooks shipped with Linux, and the timing was tough for Microsoft because at the time the company was pushing Windows Vista, which was ideally unsuited for these devices. Briefly, amazingly, Linux experienced a small leap in market share. But Microsoft responded by allowing these devices to ship with Windows XP instead of Vista. And then the company released Windows 7, with its smaller resource footprint, sealing the fate of Linux on the desktop for good.

So although Microsoft “won” the battle, it also managed to destroy the market for PCs in the process. Netbooks accelerated the downward spiral of PC prices, and although you can’t really find too many actual netbooks these days, their spiritual successors are all over the place in the form of bigger but still ultra-cheap PCs that cost as little as $299.[emphasis mine – Onuora] In fact, the average price of a portable PC sold at retail in Q4 2012 was just $420. That’s not a sustainable business.

Basically, because you can buy any size and configuration of PC today from stores, catalogues and websites, there are always cheaper alternatives to the Surface.

Heck even on this website, people are arguing that the Asus Transformer Book T100 kicks the Surface’s ass at $349.

[caption id="attachment_60977" align="alignnone" width="1024"]ASUS Transformer Book T100 ASUS Transformer Book T100[/caption]

$349.

The question is how can Microsoft create a profitable line of business selling Surface Pro 2’s at $1000 to $2000?

The answer is, long term, they can’t. Something just has to give.

Consumers have too many options from other vendors and businesses never end up paying that price anyway.


On the business side, since the Surface Pro 2 will run the EXACT same Enterprise version of Windows that a Transformer Book T100 would , it’s hard to justify making corporate clients pay more.

Consider this, if a consumer can buy a Transformer Book T100 for $349, imagine what a company that wanted to buy 10,000 units would get it for? I’m guessing between $90 and $150 depending on how much pressure ASUS was feeling.

So, how much should Microsoft charge for a Surface Pro 2?

Take the loss.

I have said this before (and got slaughtered) but will say it again – until that Netmarketshare graphic above shows a three way tie, Microsoft would be smart to set a ceiling at $599.

The entire line of Surface tablets should be a loss leader. Flood the market to get people into the ecosystem.

At $599, I would buy a Surface Pro 2 in a heartbeat. No question.

I think it would move marketshare at that price and below even though yes, Microsoft would lose money. LOSE LOTS OF MONEY.

I say it’s better to lose money to get into a marketplace that write off 900 + million dollars in inventory.

At the point when Surface tablets were showing a respectable amount of marketshare, they could work on a Surface platinum line or completely rebrand and come out with a new “premium” line of tablets at over $1000.

Paul Thurrott was right. PC vendors are continually in a race to the bottom price wise. It’s just the nature of the beast.

It’s not right and it’s not fair but for now though, I say a loaded Surface Pro 2 is worth $599.

Not a dollar more.

Enough from me, what do you all think?

How much should Microsoft charge for a Surface Pro 2?

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