The Surface RT Is D.O.A. — Few Consumers Will Buy Microsoft’s ARM Tablet

Oh dear: I had such high hopes of Microsoft’s Surface tablets — particularly when those rumors of an extremely aggressive price of $199 started circulating. Even the speculation around a $299 to $399 price point left some hope of success. Now that the pre-order service has gone live, it’s apparent that the price point Microsoft has chosen will restrict its sales to the usual fervent tech buyers and Microsoft staff (although they don’t get one free from the company, which is actually quite a good way to improve unit shipments).

Priced at $499 for a 32 Gb version — plus an additional $100 for arguably its best innovation, the keyboard cover — the Surface RT simply isn’t competitive. Sure, it’s a similar price to an iPad (but probably around twice the price of an iPad Mini) and may be similarly priced to the (unseen) 10-inch Nexus when released (but more than twice the price of the Nexus 7), but this ignores the installed base and apps ecosystem for the Android and iOS devices — and you don’t even get a full Windows experience on this ARM tablet. A cut-down version of Office is nice, and may be worth up to $50 for some consumers, but an Intel-based Acer Iconia W510 can be had for the same money. And arguments about differences in on-board storage make less an less sense as these devices increasing tap into iCloud, SkyDrive etc.

Microsoft is also ignoring the stage of development of the tablet market. We are now seeing third- or fourth-iteration tablets on rival platforms, and firms like Amazon are lowering costs by using differing business models. This isn’t like Xbox, where Microsoft could jump in at the start of a new generation because each generation effectively started from scratch; it’s not even like Internet Explorer, where the firm was late to market but used its sheer critical mass to drive the browser to No. 1.

It’s a depressing illustration of the position that Microsoft finds itself in – keen to be a “devices and services” company but tied to a variety of OEMs that it is desperate not to offend (at least in the short term). It has to price high and build hardware to “inspire” partners, but the trouble is that few are inspired by devices that fail to sell. Ironically, after all the efforts to port Windows to ARM architectures, Microsoft may have been better served by waiting a year or so until x86 tablets had established an ecosystem and then releasing the ARM device with better battery life and a more competitive price (as component costs fall).

As more and more OEMs release details of their Windows 8 touch devices, pricing trends are starting to become apparent: $499 to $649 for an x86 tablet (Acer, Lenovo); $500 to $800 for a touch-enabled laptop (pretty much all the OEMs); and premium pricing for large all-in-ones and innovative form factors (Asus TaiChi, Sony Vaio Duo 11, Dell XPS 12). All in all, this pricing is reasonable and demonstrates where OEMs are focusing: touch-enabling traditional form factors and sticking with x86 architectures. It will be these devices (with perhaps a couple of cheap OEM RT tablet) that businesses start to experiment with and that consumers buy as their “next PC” — not the failed attempt to jump on the ARM bandwagon that the Surface RT represents.

Don’t get me wrong: I think the Surface is a beautifully designed tablet with some excellent engineering and a novel UI — better than most of the existing competition. Doubtless, the couple of hundred consumers who buy them will love them to bits. Unfortunately, this all sounds depressingly familiar; perhaps Microsoft should have called it the Zune HD Surface.

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