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Microsoft's Surface Pro highlights flawed two-for-one strategy

Gregg Keizer | Dec. 4, 2012
Microsoft's upcoming Surface Pro tablet sums up the company's seeming strategy with Windows 8: That business users can do with one device what they currently accomplish with two.

Microsoft has pegged prices of the Surface Pro at $899 for a model with 64GB of flash RAM-based storage space, and $999 for a unit with 128GB. The prices do not include a keyboard-cum-cover, which Microsoft sells at $120 and $130, with the lower-priced version assigned to the membrane-style Touch Cover and the higher to the more traditional moving-keystroke Type Cover.

With a keyboard -- and few buyers will eschew one -- the Surface Pro prices out at between $1,019 and $1,129. That's not tablet territory.

"Microsoft won't drive a lot of volume with Surface Pro compared to the iPad and 7-in Android tablets, but will profitably sell units more in line with ultrabook levels," said Moorhead.

Microsoft has never disguised the fact that the Surface Pro would be a tablet with ultrabook characteristics, or sell at a price commensurate with ultrabooks'. In June, when the company surprised the industry, including its OEM partners, by introducing its own hardware, it said that the Surface Pro would sell for about the same as Intel-powered ultrabooks, whose prices have hovered at $1,000 and beyond.

The problem for Microsoft is that the outlook for ultrabooks, which the Surface Pro emulates, is dim. Windows ultrabook sales have been disappointing this year, and show little sign of improving sans dramatic price cuts. Such a move, failing similar discounts by Microsoft, would leave the Surface Pro high (in price) and dry.

In October, IHS iSuppli downgraded its estimate of 2012's ultrabook sales, cutting its projections by more than half from 22 million to 10.3 million, citing too-high prices. iSuppli argued that sales won't take off until prices fall toward the $600 bar, perhaps in 2013.

"Surface Pro is really a PC, and potential buyers will also be considering notebooks and ultrabooks," noted Moorhead.

Even without the current sales issues with ultrabooks, Microsoft's strategy of putting two devices into a single chassis may have little chance. By trying to make Windows 8 all things to all people -- and make it fit for use in a wider range of devices -- Microsoft has set itself a bar that will be very tough to jump considering the current state of computing.

"The real question is, 'What is the point of a two-in-one device or touchscreen PC?'" said Singh. "Legacy applications are not touch optimized, so using them on a Surface Pro, even with a Touch/Type Cover, is a sub-optimal experience compared to a traditional laptop."

And while the app count in the Windows Store -- the sole source of Windows 8 and Windows RT tile-style software -- has climbed dramatically, Microsoft is still working with a handicap.


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