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Analyst: Microsoft to price Surface RT tablet at $400 to $500

Gregg Keizer | Oct. 10, 2012
Microsoft's new Surface tablet, slated to ship later this month, will be priced between $399 and $499, an analyst said today, in the same ballpark as Apple's iconic iPad.

Singh did not include the Surface keyboard-cum-cover, dubbed "Touch Cover" by Microsoft, in his estimate. On its Surface website, Microsoft says, "Surface comes with ... a revolutionary, 3mm thin, pressure sensitive cover that doubles as a fully functioning keyboard and trackpad," referring to the Touch Cover.

Microsoft will also sell a more capable keyboard/cover as an accessory. Called the "Type Cover," it is thicker and provides some key travel for a more notebook-like feel.

"Estimating the BOM of the cover is a major challenge as the cost drivers are a bit of a shot in the dark," acknowledged Singh in an email reply to questions today. "But based on pricing trends for similar accessories, I'd say it could be priced around $50-$100."

Singh also estimated the BOM of the Surface Pro, the tablet powered by Windows 8 that Microsoft will launch in late January 2013.

Unlike the Surface RT, the Pro will run not only touch-style, tablet apps, but also traditional Windows software, such as Adobe Photoshop, the full version of Microsoft Office and PC games.

A 64GB Surface Pro, said Singh, would add a minimum of $320 to the BOM of the RT, resulting in a total of around $629. The biggest part of that increase? The expected Intel Core i5 processor, which adds $204 to the Pro's bill.

The BOM led Singh to peg the Surface Pro's list price at $799 to $899, which would give a margin of 21% to 30%. An $899 price, for example, would put the margin at 30%.

"Most mid-range x86 Windows 8 tablets should retail at the same price [range], with higher-end models priced above $1,000," said Singh.

Again, his estimates were in line with earlier prognostications from other analysts, who interpreted Microsoft's pledge to price the Surface Pro near an Intel ultrabook-style notebook to mean $800 at a minimum, more than $1,000 at the top end.

At a price between $399 and $499, the Surface RT will have to compete with Apple's iPad on cost as well as features, app quantity and app quality.

Apple sells the newest iPad at $499 for a 16GB model, $599 for 32GB and $699 for 64GB. It also retained 2011's iPad 2, which sells for $399 (16GB).

And it looks increasingly likely that the Surface will also have to face a smaller, less-expensive iPad, tagged as the "iPad Mini," which Apple is expected to announce next week and start selling Nov. 2 at a price between $250 and $299.

Singh was confident in his estimates, saying that because the BOMs were based on previous teardowns of other tablets, "They should be within a 10%-15% range of the actual BOM."

 

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