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Microsoft $199 Surface RT Could Burn Kindle Fire

Microsoft may use its tablet as a loss leader to get people to try Windows 8. That's likely bad news for the competition.

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Microsoft plans to introduce its Surface RT tablet for a loss-leading $199, according to a published report. If accurate, it means Redmond's entry into the hardware market could cause big headaches for rivals.

The impact could be felt most by Amazon, whose Kindle Fire tablet also sells for $199. As popular as it is, Kindle Fire doesn't compare to Surface RT, based on what Microsoft has revealed. For starters, Surface RT offers a more generous 10.6-inch screen, compared to Kindle Fire's 7-inch display.

That's just the beginning. Surface RT runs a version of Windows 8 called Windows RT. Windows RT only runs on ARM chips, and it won't run legacy Windows apps. But it's still a Microsoft platform, and that means it will--out of the box or eventually--run a new, touch-optimized version of Office 15, Skype, Explorer, and Xbox Live content. Users will also be able to acquire third-party apps from the Windows Store.

Excel on Kindle Fire? Forget about it.

Other vendors could also feel the pinch. Samsung, with its new, $500, Galaxy Note 10.1, might look over its shoulder. Samsung is also an important hardware partner to Microsoft, and plans to produce its own Windows 8 RT tablet. That's where things could get touchy. If Microsoft's Surface pricing is too aggressive, tablet OEMs may ditch Windows 8 for an Android-only strategy.

Samsung hasn't gotten to that point, but Acer seems nearly there. "We have said [to Microsoft] to think it over. Think twice," Acer CEO JT Wang told the Financial Times earlier this month. Acer, not coincidentally, has no plans for a Windows RT tablet.

[ Check out Samsung's new tablet. See Samsung Galaxy Note 10.1 Details For U.S. Launch. ]

Don't expect Surface RT, regardless of price, to have much impact on iPad sales. Windows 8 and iOS are such different beasts that it's doubtful Apple loyalists would defect to Microsoft for $300, the price difference between the new iPad and Surface RT, if Engadget's report is correct.

A $199 Surface RT tablet would also threaten Barnes & Noble's Nook, but that might be addition by subtraction for the book merchant. Microsoft recently acquired a 17.6% stake in Barnes & Noble's e-book spinoff, and as part of the deal will make a Nook app available for Windows 8. That's likely just a prelude to Barnes & Noble exiting hardware, where it's doubtless losing money, and leaving it to its new partners in Redmond.

All this is contingent on the accuracy of Engadget's report. Some question it, for good reason. The idea of a $199 Surface RT tablet is hard to swallow for many due to Microsoft's pledge that all Windows 8 RT tablets, including Surface RT, presumably, will come with Office 15 preinstalled.

Office 2010 Home & Student sells for about $120. Similar pricing for Office 15 would see Microsoft collect just $80 per unit on Surface RT hardware. That seems unlikely. It's not, however, impossible. Windows 8 is a make-or-break break from the past for Microsoft. So it might be willing to distribute Surface almost for free just to get users to try the OS, which is radically different from previous Windows.

We'll know for certain on Oct. 26, when Surface RT, Surface Pro, which runs Windows 8 Pro, and other Win8 systems hit the market.

We welcome your comments on this topic on our social media channels, or [contact us directly] with questions about the site.
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User Rank: Apprentice
8/22/2012 | 12:01:10 AM
re: Microsoft $199 Surface RT Could Burn Kindle Fire
I expect to be the sexiest tablet on the market whatever the price.
User Rank: Apprentice
8/21/2012 | 2:47:33 PM
re: Microsoft $199 Surface RT Could Burn Kindle Fire
I expect it to be 300-450$.
User Rank: Apprentice
8/18/2012 | 3:58:30 PM
re: Microsoft $199 Surface RT Could Burn Kindle Fire
They successfully launched Windows XP, Windows 7, Xbox, Kinect, practically every version of Office, Office 365, etc. etc.

You might not think Microsoft is successful at anything (lately) but all you have to do is look around.

MS is simply not going to release a Surface tablet at the $199 price point. Period.

Surface is designed to show the world what a Windows 8 tablet "should be". It will be comparable and competitve with the iPad. That's the higher margin - better quality - market that makes more sense. If an OEM wants to make $199 RT tablets, then that is up to them to own that segment. Just saying...
User Rank: Apprentice
8/17/2012 | 5:33:50 PM
re: Microsoft $199 Surface RT Could Burn Kindle Fire
Your argument makes all kinds of sense. But Ballmer and MS are really hungry to make some noise in the marketplace. When's the last time they successfully launched a product? God forbid RIM wakes up and successfully launches a BB10 device. A MS victory in the Tablet or Smartphone segment is real far from a sure thing.
User Rank: Ninja
8/16/2012 | 9:46:07 PM
re: Microsoft $199 Surface RT Could Burn Kindle Fire
It would be insane to sell RT for $199. The biggest problem, other than Microsoft losing billions a year on that idea would be that no company could ever sell an Rt tablet for much more.$199 will become the expected price.

While Microsoft can lose as much money as it wishes, because of its monopoly profits in Windows and Office, its ODM's can't. This move would be a killer, as every other ODM would not produce any tablets. They would drop their products like a hot potato.

And what would be the point? I understand that this might get the tablets into a lot of hands. But Microsoft would lose at least $200, and possibly as much as $300 on every tablet sold! They would never be able to come close to making those losses up with software and content sales.

Think of it; Microsoft sells a million tablets in the quarter, and loses $250 million. Next quarter, they sell 5 million, and lose $1.25 billion. Next quarter, they sell 10 million, and lose $2.5 billion. Where's the sense in that?
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