There has been a ton of buzz surrounding the
rumored $199 price point
for Surface, Microsoft's (NASDAQ:
) first tablet. It sounds like a brilliant marketing move for the
Windows distributor to make, but is it too good to be true? "[It]
seems like a low price for the technology in there," James D.
Ragan, Senior Equity Analyst at Crowell, Weedon & Co., told
Benzinga this afternoon. "I'd be a little surprised if that's the
Trip Chowdhry, the Managing Director of Equity Research at
Global Equities Research, said that he hopes the rumor is true.
"It makes business sense to have it priced at $199," he said.
"At $199, the product is a gem. At $800, it was useless."
Chowdhry had previously estimated that Surface would cost
$700 and $800
. He had hoped that Microsoft would save its ad budget and
give Surface away for free
However, it may be impossible for Microsoft to sell the device
at any low price point without taking a loss.
"They have to buy all the components -- the SSD, the processor,
) processor, a touch screen," said Ragan. "I just think it'd be
hard to make money at $199 on that."
Ragan believes that the lowest amount that Microsoft could
charge would be $400 to $500. He doubts that Microsoft could sell
the tablet for a lower price and make up for it by selling
"I think that's possible," Ragan said. "But you're certainly not
going to have the long-term software stream that you get from a
gaming device, an Xbox. To me, if they come out with a price where
they're losing money, there's problems with that on multiple
levels. You're gonna have other PC vendors competing in that space,
too, and that's already an issue. If they're going to undercut the
price so much, that's going to cause problems with a lot of their
Microsoft may be under pressure to charge a low price for
Surface now that Google's (NASDAQ:
) first tablet, the Nexus 7, has shipped with a base price of $199.
expected to unveil the next Kindle Fire
, which may also ship at $199, later this month.
Meanwhile, Apple (NASDAQ:
), the current leader of the tablet industry, may unveil a smaller
and cheaper iPad
(c) 2012 Benzinga.com. Benzinga does not provide investment advice.
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