Redmond is getting set to build millions of Surface tablets, an IDC analyst tells CNET. And the price? Only Microsoft knows but IDC has some thoughts on the subject.
Microsoft is expected to build a little more than 3 million Surface tablets, market researcher IDC told CNET. An IDC analyst also offered his views on the likelihood of a $199 version of the tablet.
Production plans are for a few million units for calendar 2012, said IDC analyst Bob O'Donnell in a phone interview. "Probably a little over 3 million, both [Intel] x86 and ARM," he said. Surface RT is built around ARM processors and will not support older "legacy" software that runs on Windows 7. Intel-based Surface will run Windows 8 Pro that does run legacy software.
"If they build a few million units there's no way they can sell it through Microsoft store only," he said, referring to Microsoft's current plan. "So I think that they'll sell it through traditional retail also. You can't build that many products without having a much wider distribution strategy. They just haven't shared that [strategy] yet," he said.
O'Donnell also had a lot to say about the possibility of an inexpensive Surface RT device, which a report claims may debut at $199.
"There could be two ways to get Surface. Buy it outright for, let's say, $599. Or $199 for a two-year subscription and you can get X,Y, and Z -- which, oh, by the way, works out to more than $599," he said.
The subscription theory was explained recently in a blog by a former Microsoft manager Hal Berenson, who says, "it is completely within expectations, and in fact the $99 Xbox deal is just telegraphing it for all who are willing to listen, that Microsoft is going to offer the Surface for $199 when you sign up for a TBD (to be determined) subscription of some sort," he wrote.
And he originally floated this idea in a June 13 post here.
But O'Donnell has serious doubts about a $199 Surface. Even a subscription-based Surface wouldn't work because he doesn't think that pricing model would be successful on a PC product, which Surface essentially is.
"MS Office subscription? Any Windows RT product comes with Office. So, that knocks out that theory," he said. Indeed, Microsoft states this clearly in a blog post.
"They do have a video store and music store. Theoretically they could give you a Netflix type or Pandora type deal with free access to music and video. But remember what happened to Netbooks and 3G, where you had to pay a monthly fee? That was a disaster. It took off initially but then nosedived. The point is, people catch on and say wait and minute, when I do the math on this monthly thing I'm paying way more than I want to."
And the other theory that Microsoft really wants to sell the software, not the hardware, thus the discount. "Let's say there are four competitors. In a fair world the price is about the same and they each sell 25 percent. But at $199 Microsoft sells 100 percent and everyone else sells almost zero. They (Microsoft) have a truly symbiotic relationship with [PC makers]. If you undercut their prices then all of those licenses you would have sold through [PC makers] don't get sold," he said.
Microsoft declined to comment for this story.