Analyst Shaw Wu believes Microsoft’s new ARM-based Surface tablet will need to be priced aggressively, like around the level of Amazon’s $199 Kindle Fire, in order to have a shot at making it in the tablet marketplace.
Shaw Wu with Sterne Agee said in a note to investors on Tuesday that Microsoft will need to price its ARM-based Surface close to, or even below, Amazon’s $199 Kindle Fire. The risk would be Microsoft taking a loss on the hardware, as Research in Motion has done with the PlayBook and HP did to sell off TouchPad inventory.
Brian White with Topeka Capital Markets chimed in with his belief that Surface “will need a healthy price discount to the iPad” if Microsoft hopes to gain footing. He thinks Microsoft will have a difficult time low balling the iPad, since the iPad 2 is priced at just $399. White also says he believes Apple will release their “iPad mini” this fall, which will bring even more pain to hopeful contenders like Microsoft.
Wu believes Surface may help Microsoft gain footing in the mobile device market, but noted the device line will cannibalize Windows partners like Dell, HP, Acer, and Lenovo.
Wu reported that industry sources he’d talked to indicated that one of the reasons for Microsoft’s decision to take more control and produce its own hardware is the mediocre sales of the new Nokia handset based on the Windows Phone platform.
“Despite heavy promotion and advertising and carrier desire to have a viable alternative to Android and iOS, Windows Phone 7 has found disappointing customer acceptance,” Wu wrote.
White remarked that Microsoft’s decision to control both hardware and software with the Surface was “the sincerest form of flattery to Apple.” White continued, saying the ARM-based Surface tablet will be more of a threat to Android than the iPad, as he says Monday’s presentation gave him no reason to believe most consumers would prefer the Surface over the iPad.
