Surface to Cost More than iPad, Nexus 7 and Kindle Fire Combined

By Rita C - July 28, 2012 | Tickers: AMZN, AAPL, GOOG, MSFT | 0 Comments

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The rumor mill has again started rolling and this time it has to do with the much talked about Microsoft (NASDAQ: MSFT) Surface tablet computers. It seems Surface will carry a price tag much higher than what was being expected and what is already prevailing in the market. If this is the case, what lies ahead for Microsoft? And how high a price are we talking about? Let’s dig deeper.

It’s a mad, mad price!
Webhallen.com, a Swedish website, listed prices for the four variants of the Surface tablet computers and it seems the cheapest Surface will cost something around $1,000. You read it right -- $1,000. To this, all I can say is this is madness!

According to the site, Surface for Windows, RT will cost f 6,990 SEK and 9,990 SEK, depending on the disk space, and the Surface for Windows Pro will cost 12,990 SEK and 14,990 SEK, again depending on the disk space. If these figures are converted at roughly 1 SEK being equal to $0.143, the cheapest Surface comes to a rounded-off figure of $1,000. This is the price of the Surface for Windows, RT 32GB version. The most expensive model is the Surface for Windows Pro 128GB version, which after conversion will cost something around $2,142, which would make it the most expensive tablet on the planet.

(Source: WEBHALLEN Website)

If this actually turns out to be the price once the product is launched on Oct. 26, then owning an Apple (NASDAQ: AAPL) iPad and a Google (NASDAQ: GOOG) Nexus 7 will be much cheaper than owning the cheapest Surface. The Nexus 7 is priced at just $199, at par with Amazon’s (NASDAQ: AMZN) Kindle Fire. Rather, owning all three will still be cheaper than owning the Surface.

However, keep in mind that the tablet might not cost the same in the U.S. Since the standard of living in Sweden is pretty high, gadgets automatically cost more over there. Apple’s iPad, which is available for $499 in the U.S., costs 5,395 SEK amounting to $771, roughly 1.54x. So, we can expect slightly lower prices for the product in the U.S.

The competitive landscape
Today, since we are talking in terms of SEK, let’s check out a few price tags in that currency. Though the devices cost less in the U.S., for comparison purpose I have used price in SEK as the frame of reference. Here are the prices, if the website's prices turn out to be accurate:

• Apple’s cheapest iPad costs 5,395 SEK = $771
• Apple’s costliest iPad costs 7,195 SEK = $1,029
• Microsoft’s cheapest Surface costs 6,990 SEK = $1,000
• Microsoft’s costliest Surface costs 14,990 SEK = $2,142
• Cost of an ultrabook is on average 14,000 SEK = $2,000

So, from all this we can see:

• The cheapest Surface is 1.3x costlier than the cheapest iPad
• The costliest Surface is 2.1x costlier than the costliest iPad
• The most attractive one: the costliest iPad costs almost the same as cheapest Surface

Now, the questions is, if the price difference turns out to be so great, will the consumers be actually interested to buy the latest from Microsoft?

Apple has been dominating the tablets space since it launched its very first iPad and in the recent quarter the company reported an outstanding 84% increase in iPad shipments. Things are looking to be all in favor of Apple. On one hand, Apple is the most talked about and the most aspired brand in the consumer electronics space. It’s a style statement and it is a well established one.

On the other hand, users haven’t even got their hands on the Surface. The devices is unknown, the Windows 8 OS powering it up is unknown. In this situation, I think, only a very small fraction of the population will actually pay this high price instead of buying everyone’s favorite iPad. Users are accepting the Nexus 7 with a lot of excitement and that's a lot because of the $199 price. In fact, the device is so much in demand that the dealers are facing a shortage in supply. In Apple’s recent quarter, the company reported a fall in the average selling price of tablets as consumers are buying more of the inexpensive models. If this is the current trend, then how can Microsoft succeed with such a high price?

Unique positioning
Microsoft is no fool and they know what they are doing. Whenever we speak of Surface, we call it a tablet computer and not just a tablet. There is no doubt about how powerful Surface is as understood from the specifications. The Pro model can easily give laptops and ultrabooks a run for their money. Surface Pro, like I already mentioned, will be priced at par with ultrabooks as that’s the segment it aims to capture. The Surface will not be similar to other tablets running on Android and iOS. It will be powered by the full version of Windows 8, enabling it to enjoy a wider scope of application and the Surface Pro will also get an additional keyboard accessory with tactile keys. But is Microsoft being able to understand the pulse of the market correctly? Are the consumers ready for the next-generation tablets? Only time will tell.

Concluding thoughts
Value for money. That is what each buyer will look at. If you are thinking of buying a laptop or an ultrabook then Surface Pro can be a valid option. But if you are looking to buy just a tablet and you just don’t need it to do everything your laptop does, then probably an iPad or a Nexus 7 will get a preference above the low-spec Surface. The high price of the device may put it in a different league of competition and most likely is going to act against it. Anyone who wishes to own a Surface needs to have a really big pocket. However, let’s not jump to conclusions and let’s wait for a confirmation from Microsoft about the price of the Surface. 

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