re: Windows 8 Tablets: Why Microsoft Must Slash Prices
This is a more complex issue than you assert. It's been estimated that Surface costs about as much as iPad to produce (for RT). The Pro model costs a good deal more to produce. How much can they reduce those prices by then? $50? Maybe. Any less than that and they are again walking into the dreaded area of losses, which must continue, as that becomes the expected pricing model.
We've seen that boondoggle with the XBox, where Microsoft has now lost over $9 billion over the years, with no end to those losses in sight, particularly with a new model coming out. If you need to subsidize a product to accumulate sales, then the product has failed. That's basic business 101.
The only reason why Microsoft can afford to lose so much money on most of its businesses is because of the dual monopolies of Windows and Office. But the good times of Windows is coming to an end, and Office is following.
So now we get the rumors that Microsoft will have a 7" tablet in order to cut prices. Not the same thing at all. A problem is that the 10.6" screen is already too small for anything other than the "Modern UI" portion of the OS. I used some of the "convertibles" Microsoft was pushing as tablets, and they were difficult to use because of the "small" 13-15" screens. The current models, with their even smaller screens are even harder to use. Can you really imagine using Office on an RT machine with a 7" screen? How about the Pro? Nuts!
And then we have the gorilla in the room, which consists of all the OEM's who must sell their own tablets. If Microsoft cuts pricing, they will be forced to cut to the same level, or more likely, even more so. We already see a number of OEM's who are reluctant to bring forth Win 8 tablets in any form, and the ones who have, are seeing very microscopic sales. These companies are already having the burden of paying Microsoft for the OS, and in the case of RT, which included a truncated version of Office, a rather lot of money, estimated at up to $80 per tablet. How can they cut prices?
I understand Microsoft's dilemma. But that dilemma is of their own making. Management at Microsoft is very poor. Ballmer is not a good CEO. He's failed to reign in the various fiefs, and for that, Microsoft is suffering.
It's very possible that Apple has it right, and Microsoft has it wrong. Perhaps the exact same OS should not be on a tablet and a "classic" computer.. Perhaps there should be a merging of major functions, but on separate OS's. Even so, RT offers nothing of real value other than a version of Office that doesn't belong on it. If sales are any indication, that's the case. How many people want to buy a tablet that really NEEDS to have a keyboard? Few, I would think.
With its advertising for these devices, as with their smartphones, Microsoft shows that it is out of touch with potential buyers. With their smartphones, Microsoft continues to push the myth that users don't want to use their devices, and that Win Phone is the best OS for doing just that, not using it. Microsoft doesn't realize that people love using their smartphones, so they are preaching something that people don't believe in.
The same thing is happening with Surface. Their advertising has kids jumping around, clicking the keyboards onto their tablets, but shows little else. All this does is to tell people that you need a keyboard with Microsoft's tablets, something that people don't want.
If there's a lesson to be learned by business, it's that you don't try to sell people something they don't want. Microsoft hasn't learned that lesson, so every one of their business other than those involving Windows and Office continues to lose major amounts of money, because Microsoft is like AT&T was, they don't know how to sell to anyone who isn't already a captive audience.
If that doesn't change, Microsoft will go the way of AT&T, and I don't mean the current AT&T, which was a merger between AT&T and Cingular, I mean the one that disappeared.