Why a $199 Microsoft Surface Tablet is Probably Wishful Thinking

Paul Lilly

You know how pessimists like to point out that if something is too good to be true, then it probably is? As much as we hate to admit it, that idiom most likely applies to a recent rumor suggesting Microsoft finalized plans to price its Windows RT-based Surface tablet at a mere $199. It's fun to speculate on what kind of impact that would have on the tablet market, but at the end of the day, all that rhetoric would be for naught because it's just not going to happen, according to several analysts.

Once such analyst is Rick Sherlund over at Nomura Equity Research. Sherlund makes it his business to keep his finger on Microsoft's pulse, and in this instance, he believes Surface will bubble at a much higher price.

"We do not believe that Microsoft will price Surface at $199, but rather that it would be priced in similar range with the iPad (around $500)," Sherlund wrote in a note . "The report suggests that Microsoft would potentially price its announced Surface device at $199; this is well below the BOM of probably $300 and would, we think, undermine its OEM partners and thus we firmly believe this will not be the case."

The only hint Microsoft has provided to date is that Surface will be priced competitively with other ARM-based tablets, and there aren't any comparable 10-inch slates selling for a pair of C-notes. That's 7-inch tablet territory, which, incidentally, Sherlund says he "would not be surprised to see Microsoft ship a 7-inch device."

One other scenario that's been talked about online is that Microsoft could subsidize Surface to hit the rumored $199 price point. It's not totally farfetched, considering Microsoft recently started doing this with its Xbox 360 console, which gamers can grab for just $99 up front plus $15/month (it also includes Xbox Live Gold service and a Kinect).

What do you think, is a $199 Surface tablet feasible, or just wishful thinking?

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