As a rumor is going around that the WART Surface will sell for $200, rather than $400~500 for a typical 10" tablet... why and how?
- If this is a rumor that is false MS pulls a fast one and releases a 7" model... why $200? Because they are in a bad position compared to iPad and Android. They'll need to sell it at a loss to gain market share. After all, if Joe-Blow looks on the shelf and sees a $400 iPad2, a $300 iPad-mini, a $200 Nexus7 and a 10" Win8 tablet for $200... which would the person buy first?
Remember how the HP touchpad sucked in sales? Oh yeah, HP wanted $500 for a half-baked tablet... when they sold it for $100, everyone was sold out in hours... becoming the #2 tablet in the world... for a while. HP sold it at a loss, better something than to bury them in the desert.
The Build Of Materials costs of the iPad2 is $245. So I think we can expect about the same price for the MS WART tablet. If MS sells a 10" tablet for $200, it *WILL* sell.
Lets say MS sells 1 million units in 2 months, That would be a $45million loss, BUT that would be better than trying to sell 200,000 units at $400 in 4~6 months. History: after 30+ days on the market, Best Buy might have sold 25,000 HP Touch pads (not including returns) - they had 270,000 in stock...
The $45million loss is a drop for MS... and also cheaper than costly AD campaign for a dead-last tablet that most people wouldn't want to buy anyway. If those buyers end up using the APP store to buy books, music and apps - then the loss could bring them closer to black. Nexus 7 is expected to hit 1 million any week/day. Also remember, MS paid Nokia $250million to deal with the failed WP7.
So... I would say, this is genius of MS to do this, they can afford to do this. If sales tank for the WART platform, developers and shoppers will stay away. So, they sell it for a loss (XBOX360 anyone?) for future earning. Once they hit a few million units on the market, they can raise the prices up, grow the market normally.
That said, I hope MS retails at $400 for the 10" tablet. Their partners won't be making any money at $200 or $300 MSRP... unless MS is ALSO paying them. Guess we'll know if 2 months, eh?