In Shadow Of Apple iPad Launch, Is Microsoft Surface Priced Right?

November 10, 2013 by Douglas A. McIntyre

Source: courtesy of Nokia
This month was hardly a good one for any company, other than Apple (NASDAQ: AAPL) and Samsung, to release a new tablet. There is a blizzard of new products. And, the media and consumer focus is on the latest generation of the iPad. Nevertheless, Microsoft (NASDAQ: MSFT) has launched its Surface 2 and Surface Pro 2. The world’s largest software company has few advantages in the hardware sector, so the retail price of the Surface had to be attractive.

Since operating systems matter, the Surface 2 already has a disadvantage to consumers who already prefer Apple and Google’s (NASDAQ: GOOG) Android. The new Nexus 5 may be smaller than the Surface, but some portion of consumers will elect for smaller screens which makes Microsoft’s rollout  even more difficult. The smaller iPad will have the same effect. The same screen size challenge is also presented by newer versions of the Amazon (NASDAQ: AMZN) Kindle Fire.  The number of screen sizes, operating systems, and prices in the tablet market is huge.

Microsoft has set the price for the Surface 2 at $499, and the Surface Pro at $899. The first decision many consumers will make when they look at the Microsoft product is that the iPad air has a base retail price of $499 for the 16GM. The prices rises to $599, $699, and $799 for the $799 for the 128GB model. For the technologically uninitiated, the price vs. power trade off has already become complicated between the two machines. Apple’s brand power is likely to trump Microsoft’s, unless Microsoft is willing to go with a much lower price point.

To make the size, power, and price maze even more difficult to master, Amazon, which has the benefit of the largest e-commerce presence in the U.S., offers its Kindle Fire at a price point which begins at $139 for the new Fire HD. Its screen size is only 7″. For those who want a larger screen, Amazon offers the Kindle Fire HDX 8.9″ tablet. The price for this starts at $379, and rises to $499 with Wi Fi and 4G LTE from Verizon (NYSE: VZ) What happens to the customers who want the Kindle which runs on the AT&T (NYSE: T) network? They can check with Amazon, or AT&T, or Verizon… if any of these has an answer

Complicated enough? There’s more.

The Samsung Galaxy Note 10.1–2014 Edition is priced at either $$549.99 or $599.99. Samsung is one of the few competitors in the market which uses pennies as a way to differentiate price. Most consumers will ignore that. The Galaxy Note will be riding the coat-tails of the wildly successful Galaxy 4S. If brand is important, some tablet buyers will take comfort in a name they already know.

Microsoft’s new Surface may be the best product in the market, with prices of $499 and $899, but how would anyone know?