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New Rumor: Microsoft Surface Tablet to be Sold For 2 Chickens and a Duck

There’s new rumors circulating today about the Surface tablet. According to Engadget’s quote unquote reliable sources, the base model Surface tablet is going to retail for a measly $199. This is the same tablet which was rumored, at one point, to cost a thousand dollars.

Thank you Engadget, I needed a giggle.

I’m laughing at Engadget right now because I have my own sources and they’re saying that the Surface tablet is going to sell for far less.  I’ve been told by sources as reliable as Engadget’s that Microsoft will be selling these tablets from their stores via a barter system. Bring in a duck and 2 chickens and you can walk out with a tablet.

I’ve also heard that MS will hold buy-two-get-one free sales on alternate Tuesdays, and that select locations will trade you a tablet in exchange for an interpretive dance. Microsoft is also offering a bounty on the historic Microsoft plaque which was stolen from Albuquerque back in April. Return it and they’ll give you your weight in Surface tablets.

Yeah, I don’t think much of today’s rumor, and now that I’m done heckling it let me explain why.

A $200 price tag isn’t just below the parts cost for this tablet, like Engadget says; it is about half of what I expect the base model to cost in terms of parts. That makes the price not only unlikely but so improbable as to be virtually impossible.

Yes, Microsoft might decide to lose a little money on this tablet, but do you really think they’ll blow tens of billions of dollars? I don’t. This is one of those rumors that should never have made it past Engadget’s email account. It is laughable on its very face.

image by pennuja

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Mike Cane August 14, 2012 um 3:09 pm

Those buying instructions sound as complex as the game of Fizzbin.

Nate Hoffelder August 14, 2012 um 3:17 pm

You do realize you’re speaking to the 3 time national champion Fizzbin player, right?

Timothy Wilhoit August 14, 2012 um 3:24 pm

Fizzbin isn’t that hard, you just have to make it up as you go along. It’s kinda like Calvinball…or that Engadget article. 😀

Apple Continues to Crush the Tablet Competition – AppNewser August 14, 2012 um 3:31 pm

[…] are circulating today that Microsoft might be considering a ridiculously low price on MS Surface tablet, and after I saw these new stats from IHS iSuppli I could see […]

Mark August 14, 2012 um 3:34 pm

Well, the iPad 3 is estimated to cost about $316 to make. So, if the Surface is anything close (and it probably is), then a selling price of $200 would be about a $120 loss per tablet.

That’s unlikely, maybe, but as I’ve noted on Twitter, Microsoft took a hit with each Xbox for the first few years of its production. They did that to make headway in the console wars, and more importantly to build a powerful presence in the living room, which they’ve accomplished.

Evaluating whether they’d sell this low, or even $299 (which would also be powerful), one has to consider how important it is to their very survival that they recover in mobile. If they can’t counter the iPad and iPhone (and Android), then their future is seriously jeopardized.

How much is survival worth to them? Then consider that they have about $60 billion in cash.

Still seem so unlikey?

fjtorres August 14, 2012 um 5:36 pm

MS *said* the Surface tablets would sell at *comparable prices to other ARM tablets and provide OEM price parity (translation: they would sell with enough profit margin baked in for their OEMs to sell comparable hardware). Both of those suggest a price point starting at $399 and most likely $499.
The XBOX sells into a walled-garden market where all software generates royalties so a subsidized console price is a viable business model.
The Surface Tablets are supposed to be the flagbearers for Win8 Tablets, an open software market not a walled garden.

Mark August 14, 2012 um 5:50 pm

I hear you.

Good points all around. I’m not sure that Microsoft made money from the Xbox for a few years even given software subsidies, and I believe they took a loss for quite some time because they wanted a presence in the living room. However, you do mitigate the Xbox as a good example here somewhat, because as of now it’s very profitable.

Note that Windows 8 RT will be closer to a walled garden, just like Windows Phone is, in that I believe "Metro" apps (or whatever they’ll be called now that the Metro name is kaput) can’t be sideloaded. Certainly, apps can’t be sideloaded on Windows Phone. So, there’s a revenue stream there for Microsoft with Win 8 RT tablets as well.

And, yes, you’re right, Microsoft did say that. So probably, unless they were fibbing, that puts the lie to the rumor.

However, I still submit that Microsoft should be aggressive here. Like I said, maybe not $199 aggressive, but possibly something like $299 aggressive. Hell, I think Microsoft needs to wean itself off the OEM model, because long-term I’m not sure they’ll be able to maintain a good enough experience to compete with Apple and eventually Google/Motorola.

Or, I could be completely wrong here and Microsoft will continue to rely on their OEMs to make good products. In which case, sure, undercutting them so violently on Win 8 RT tablets would be a bad idea.

Good thing is, we’ll see in a few months.

fjtorres August 14, 2012 um 7:00 pm

Oh, no question that MS *should* sell Surface as cheaply as they can get away with. And I suspect that if the OEMs deliver Win8 tablets that are as underwhelming as their Win7 offerings, MS might go all the way to a full subsidized-hardware model. But so far they seem to be using Surface to push the OEMs more than to displace them.
I could see Surface launching at $499 and hitting $299 by spring if the WinTabs don’t get enough traction. But initially at least they’ll give their not-so-reliable partners one last chance to pull their weight in the mobile arena.
(I suspect that their plan B starts with an outright buyout of Nokia just as Google’s started with the Moto buyout.)

Nate Hoffelder August 15, 2012 um 12:50 am

Considering that a $200 Surface tablet would kill off the entire Windows tablet market as well as most of the notebook and laptop market, thus pissing off all of Microsoft’s OEM partners, yes.

Mark August 15, 2012 um 12:52 pm

Well, I don’t agree that it would be so dire as you propose so immediately, but here’s my extreme devil’s advocate response: isn’t it possible that iOS and Android threaten to do precisely the same anyways? Looking at the longer term, and taking various pundits at their word, one could conclude that in five years time most people will be buying smartphones and/or tablets (or some combo) anyways, and the desktop Windows platform will be significantly degraded anyways.

I don’t necessarily agree with this, but I concede that it’s possible that only very specific people will continue to buy desktop and notebook PCs, and that those people will continue to do so no matter if there’s a lightweight alternative available for $199 or $299. In fact, is $199 vs. $499 really so dramatic a difference, compared to $499 vs. $999 or over $1000 for the typical (decent) Ultrabook? How much of a difference does it make to most people looking for a notebook that a tablet option is $199, $299, or $499?

So, if people are going to buy smartphones and tablets, including $249 iPad Minis, then I could see Microsoft looking at the inevitable and deciding they want to dominate this "new" market. As always, if you’re going to be eaten, it’s best to cannibalize yourself.

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