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Just how much will Microsoft Surface cost?

Despite rampant Internet speculation, Microsoft has yet to announce an official price for its upcoming Surface tablet. Here's my take on what that price will be.

The Surface RT should be released around October 2012, with the Pro version hitting shelves about three months later.
Josh Lowensohn/CNET

Recently the Internet at large and tech sites in particular (including CNET) jumped on the "news" that a Swedish retail site had the skinny on the supposed retail price of the Microsoft Surface tablets.

Thankfully, and after only a few hundred forums and comment spaces exploded, calling for the head of Steve Ballmer, the Swedish site in question responded, clarifying that it came up with the price on its own, with no inside knowledge from Microsoft.

Typical weekday Internet confusion birthed from a lack of facts and no desire to actually seek any out. If nothing else, the ordeal left me with one primary thought: "Wow, I'm glad I'm off today and don't have to cover that story." However, my secondary thought was closer to, "With less than three months before the purported release of the RT version of the tablet, we still don't have an actual price from Microsoft." Or something close to that.

So due to my lack of better judgement and a pathologically masochistic tendency to consistently offer the Internet my humble opinion, I've decided to speculate about just what the prices of the RT and Pro versions of the Surface will be at their respective release dates.

While writing this I asked myself the following question: based simply on my gut, what do I think the price would be? Then I set about attempting to disprove said gut with cold, hard logic. Funny thing is, I kept coming back to a price very close to my original guess: $530 to $630 for the Surface RT (32GB and 64GB) and $850 to $950 for the Surface Pro (64GB and 128GB).

Call it confirmation bias -- it may be -- but I think my logic was sound. Still, I doubt even Microsoft has decided on an actual final number just yet, and to be completely clear, the following is simply speculation on my part based on what the company has said publicly and what I think its goals are or at least should be.

Back in June, Microsoft announced two versions of the Surface tablet: the Surface RT, running on an ARM CPU, and a Pro version, running on an Intel CPU and with a full version of Windows 8. The company stated that both would be "competitively priced," with the RT version seeking to be in line with tablets and the Pro version competing with ultrabooks.

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What exactly is a 'Premium tablet'?
The Surface is a premium tablet, and I think Microsoft wants it to compete with other tablets of that class. I define premium tablets as those meant to offer a full tablet experience with as little compromise as possible. The most popular current examples of this class are the third-generation Apple iPad and the Asus Transformer Pad Infinity TF700.

Premium tablets will usually include two cameras, a fast (quad-core, at least for the GPU) processor, a high-res screen, and a durable (usually metal-based) build. So far, we know Surface will include both front and back cameras and "HD" (at least 1,280x720) and "Full HD" (at least 1,920x1,080) screen resolutions, for the RT and Pro versions, respectively. In addition, the RT tablet will sport an Nvidia CPU of unknown core count. The Intel Core i processor the Pro will house has yet to be revealed. As for its build quality, I actually got to hold it for a few, brief seconds at the announcement event last June and can say that it feels like a durable, well-built device.

To get such features on the Transformer Infinity, Asus asks $500 for 32GB and $600 for 64GB. The iPad is $600 for 32GB and $700 for 64GB. As a premium tablet, Microsoft will look to hit prices similar to these.

With the iPad's huge popularity, apps support, and ecosystem, Microsoft cannot charge directly at Apple without a sound strategy, and it must know that releasing the Surface at the same price as the iPad will doom it. One simple tactic Microsoft should use is to undercut the iPad's price. Pretty obvious move, sure, but the question is: by how much?

It could cut as much as $100, which puts the Surface right in line with the Infinity. At that price it would likely sell a few more units, but I believe this would also communicate to the general public that the Surface RT isn't "worth" as much as an iPad and should be thought of as more of a second choice, if you decide to not get an iPad.

I don't think Microsoft's ego will allow for a price quite that low. Instead, I believe we'll more likely see $530 for 32GB and $630 for 64GB. That's a small difference in price, but I believe a huge difference in perception. This is enough of an iPad undercut to get the attention of consumers who buy solely based on price (and believe the iPad to be overpriced), while concurrently communicating that you're still getting a premium tablet and not a "poor man's iPad."

Only pros need apply
Determining the price of the Pro is a bit trickier. The Surface Pro will include an Intel third-generation Core i CPU, DisplayPort, and USB 3.0, and it will run a full version of Windows 8, bringing it closer to an ultrabook in capabilities. Ultrabook pricing currently ranges from $630 to $1,350. Ultrabooks offer larger screen sizes than the 10.6-inch Surface Pro will, and many PC ultrabooks also include huge hard drives starting at 500GB; the Surface Pro will top out at 128GB of flash memory.

Some have speculated that we'll see prices over $1,000. I feel differently. I think Microsoft will take a page from Apple's MacBook Air playbook and attempt to exploit the $1,000 psychological barrier. The MacBook Air's pricing starts at $999. The fact that you can get an Apple computer for "under $1,000," at the very least, intrigues people. I myself was very close to purchasing one a few months ago based 30 percent on need and 70 percent on price.

That $999 price is effective at reeling shoppers in, increasing the chance that they'll eventually buy something, and a starting price of $1,100 would simply not be as effective. It's just not as sexy as $999.

So what does this have to do with the Surface? Essentially, I don't think consumers are ready to see a tablet retail for over $1,000, regardless of whether there's an ARM- or X86-based processor inside.

Based on my admittedly theorized $1,000 barrier, I expect the following: $850 for 64GB and $950 for 128GB. Apple and other ultrabook vendors can get away with charging over $1,000 for an ultrabook; Microsoft can't for a tablet, and anything that retails for over $1,000 will be a struggle for the company to sell.

Why this matters
The Surface will be a big part of Microsoft's Windows 8 strategy, and if the company wants it to also be a successful part of that strategy, it has to get the price right.

From all accounts, the company has devoted a lot of time and effort to building a premium tablet. It'll want the price to reflect that, but at the same time has to balance the fact this is essentially a new market for the company and it has a lot to prove. Here's hoping Microsoft makes some good choices.