Microsoft Isn't Dumb Enough to Blow This Chance

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We know that Microsoft (NAS: MSFT) is rolling out its own tablet later this year. We just don't know when it will come out. We also don't know how much Microsoft's Surface will cost.

Jaws dropped earlier this week after Swedish consumer electronics retailer Webhallen posted pre-order pricing online for the upcoming line of Microsoft tablets starting at 6990 Swedish krona. What? That's nearly $1,020! Making things even worse, the Windows Pro models will set you back more than twice that much.

After the shockwaves settled, the market realized that there's no way that Mr. Softy would price itself out of the tablet market before it even got started.


No one is going to pay four figures for an entry-level tablet when Apple's (NAS: AAPL) iPad can be had for less than half as much. Tablets fueled by Google's (NAS: GOOG) Android can be had for even less!

False alarm, folks
It didn't take long for this widely-proliferated rumor to get nipped in the bud. The retailer admitted in a statement to Techie-Buzz.com that it has not received official pricing for the potentially game-changing tablet. It simply wanted to set up a page for pre-ordering information, going with a high preliminary price.

If and when the tablets hit the market, Webhallen will adjust the prices accordingly, including making sure that customers, who have the gall to order at these high prices, receive the lower eventual price.

In other words, there's nothing to see here.

Move along.

Microsoft wasn't born yesterday
We're seeing a humble Microsoft these days. The software giant knows that it can't charge a king's ransom for its wares. We're seen aggressive pricing on Nokia's (NYS: NOK) Lumia 900 handset, likely the result of Microsoft lending an assist to the troubled Finnish handset maker as it promotes the flagship smartphone running its mobile operating system.

Even the price to upgrade to Windows 8 later this year will be far less than what the company has charged PC owners in previous upgrade cycles.

Keeping the Surface line cheap or, at the very least, not pricing itself out of the market, has to be an important component of the strategy here.

Pricing isn't everything, of course.

Research firm Strategy Analytics issued a report yesterday, claiming that Apple's market share of the tablet market, as of the second quarter, stands at 68.3%. Despite the proliferation of Android tablets at far lower price points, Apple's share of the market has grown from its still hefty 62% slice a year earlier.

However, after seeing the first wave of non-Apple tablets falter two years ago, by rolling with a strategy of superior specs at higher price points, the only way for Surface to stand a chance here is to price its gear aggressively.

The delicate balance
Marketing Surface will still be a challenge for Microsoft. There's a conflict of interest here. There aren't many Microsoft tablets on the market, but the higher-end tablet -- the Intel (NAS: INTC) -powered line running Microsoft Pro -- will be comparable in features and computing power to the PCs and notebooks  running Windows 8.

Microsoft may not mind the shift. It can dream of the same ecosystem that Apple - and, to a lesser extent, Google -- enjoy with their mobile operating system app storef ronts. However, it's still in a bind. If it prices the Surface too cheap, it will alienate important hardware partners. If it prices the Surface too expensive, it will alienate rational-thinking shoppers.

We can ignore the chatter of four-figure Surface tablets, at least in discussing the entry-level gadgets. However, we can't ignore that there may not a single perfect price for a very important Microsoft product.

Let's get mobile
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The article Microsoft Isn't Dumb Enough to Blow This Chance originally appeared on Fool.com.

The Motley Fool owns shares of Microsoft, Intel, Apple, and Google.Motley Fool newsletter serviceshave recommended buying shares of Microsoft, Intel, Apple, and Google.Motley Fool newsletter serviceshave recommended creating a bull call spread position in Microsoft.Motley Fool newsletter serviceshave recommended creating a bull call spread position in Apple. The Motley Fool has adisclosure policy. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.Longtime Fool contributorRick Munarrizcalls them as he sees them. He does not own shares in any of the stocks in this story. Rick is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.

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