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3 Failures From the Surface Launch

December 28, 2012

According to research firm Parks Associates, 45% of consumers surveyed expressed interest in the Surface before the pricing was announced. This same survey was conducted after the $599 bundled keyboard price was announced, and only 21% of respondents were still interested.

According to IHS, the same $599 bundled package cost $287 to build. That fancy keyboard-cover-case, which retails for $119, is estimated to cost $16 in parts. This is a great divergence from the company that has a history of product subsidies to boost market share. Perhaps Microsoft has Apple iEnvy, compelling it to place a higher priority on profits?

Before the Surface launch, Microsoft had zero tablet market share, making a strong case for a more aggressive stance on pricing. It could have easily sacrificed some profit to price it the same as the $499 entry-level iPad with Retina Display -- the de facto premium tablet. Based on this estimate, Microsoft could afford to price the Surface to the $329 iPad Mini, potentially killing Apple's iMomentum. Doesn't Microsoft know iEnvy is a deadly sin?

From the article, "3 Failures From the Surface Launch" by Steve Heller.

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