Analyst: Microsoft Should Give Away Surface for Free


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Instead of spending hundreds of millions of dollars on marketing, one analyst believes that Microsoft (NASDAQ: MSFT ) should give away its new tablet. "One hundred million to two hundred million dollars [worth of these] devices should be given away for free," Trip Chowdhry, the Managing Director of Equity Research at Global Equities Research, told Benzinga. "[Give them] to developers, educators, business users, CEOs, for whatever reason."

Chowdhry also suggested that Microsoft could initially offer the tablet as a freebie to those who purchased a brand-new Windows PC.

While this might sound a bit unorthodox, Chowdhry argues that if Microsoft takes the normal route and spends hundreds of millions of dollars on marketing but offers no free tablets, the product will be, as Chowdhry puts it, "Dead on departure."

"People switch from some other devices when the new one is 10 times better than what they're using," Chowdhry explained. "What I've seen so far, I don't find anything that compelling. It's a good thing they're doing for Windows 8. It's good for the ecosystem. But I think the most prudent thing for Microsoft to do is not repeat the same mistakes that HP made."

Chowdhry is referring to the $100 million loss that Hewlett-Packard (NYSE: HPQ ) incurred when it was forced to pay for unsold TouchPads .

Chowdhry thinks that HP would have been smarter to give out $100 million worth of free TouchPads before the product flopped.

"Microsoft has got the pricing wrong," said Chowdhry, who estimates a $700 to $800 price point for Surface . But he believes that if Microsoft can get people to use the device today and worry about sales later, the company could capture 5% to 10% of the tablet market.

"The problem Microsoft has is that people just run away from their products," Chowdhry warned. "There is a mental block that Microsoft has created because of its past actions."

That mental block was largely eliminated with the Xbox 360, a game console that slowly transformed into a multimedia entertainment device.

Still, Chowdhry believes that people are "hesitant to try" Microsoft products. "They don't think the products are stable," he said. "They don't think they are innovative. They think they are difficult to use."

But based on what was shown yesterday, Chowdhry does not believe that Surface will be difficult to use.

There are, however, other hurdles for the Windows maker to overcome: security issues.

"Security is not a product; it is a policy," said Chowdhry. He said that consumers don't live in homes with iron doors, barbed wire, bullet-proof windows, and 10 guard dogs. But security (anti-virus) companies have given us the impression that we need to guard our Windows PCs at all times.

"Microsoft let all these security companies….create an image that Microsoft products are bad," said Chowdhry.

Still, Chowdhry believes that Surface's success could all come down to marketing.

"The way the company sees a product and the way the customer sees a product are usually….very different," Chowdhry concluded. "Let the market define how it wants to use it. That was Apple's (NASDAQ: AAPL ) genius [with the iPad]."

Follow me @LouisBedigianBZ

(c) 2012 Benzinga does not provide investment advice. All rights reserved.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing Stocks
Referenced Stocks: AAPL , HPQ , MSFT

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