Microsoft Reveals Surface's Best-Kept Secret

One of the biggest and most important unknowns regarding Microsoft's (Nasdaq: MSFT  ) upcoming Surface tablet has been the device's pricing. Steve Ballmer didn't really help much when he said it could be anywhere from $300 to $800. He might as well have said it'll be somewhere between "a little" and "a lot." Thanks, Ballmer.

Secrets, secrets are no fun
Well, the software giant has now tipped the pricing of the new device that launches next Friday. The Surface will start at $499, entry-level pricing parity with Apple's (Nasdaq: AAPL  ) iPad. However, it will offer more storage than the tablet from Cupertino, with configurations starting at 32 GB compared to Apple's 16 GB.

Source: Microsoft.

Forking over an extra $100 will get a Touch Cover included, and another Benjamin on top of that boosts storage up to 64 GB. There's not too much credible competition to the iPad in the full-sized tablet market, but Amazon.com's (Nasdaq: AMZN  ) upcoming 8.9-inch Kindle Fire HD is hoping to take a shot when it's released on Nov. 20. Let's see how these three tablet families stack up on pricing.

Product

Display Size

Storage

Price

Surface without Touch cover

10.6-inch

32 GB

$499

Surface with Touch cover

10.6-inch

32 GB / 64 GB

$599 / $699

iPad 3

9.7-inch

16 GB / 32 GB / 64 GB

$499 / $599 / $699

8.9-inch Kindle Fire HD

8.9-inch

16 GB / 32 GB

$299 / $369

Sources: The Verge, Apple, and Amazon. Kindle Fire prices shown with special offers.

Presumably, buyers should then be able to get a 64 GB Surface for $599, although that wasn't explicitly shown as an option. This would mean that Microsoft is planning to slightly undercut Apple by offering more storage at similar price points.

Apple's iPad Smart Cover costs between $39 and $69, so Microsoft's Surface Touch Cover costs a bit more ($120 when purchased separately), although it offers more functionality since it doubles as a keyboard.

These price points are specifically for the Windows RT flavor of the tablet, which sports a quad-core NVIDIA (Nasdaq: NVDA  ) Tegra 3 inside, while the more full-featured Windows 8 models with Intel (Nasdaq: INTC  ) chips will be priced higher. For example, Samsung has priced its ATIV Smart PC 500T, one of its first Windows 8 tablets, starting at $750. That device comes with an Intel Atom chip inside.

Not quite "resolutionary"
Additionally, Microsoft has been coy with releasing full technical specs of its Surface tablet also, which is rather frustrating if you're trying to perform a competitive analysis. It only provided a handful of specs (link opens PDF) when the device was unveiled over the summer and hasn't elaborated much beyond that. Today's brief disclosure also came with a full spec rundown.

Since a tablet is all about the display, those specs are rather important, and in this department Surface is no show-stealer.

Product

Display Size

Resolution

Pixel Density

Surface RT

10.6-inch

1366 x 768

148 ppi

iPad 2

9.7-inch

1024 x 768

132 ppi

iPad 3

9.7-inch

2048 x 1536

264 ppi

8.9-inch Kindle Fire HD

8.9-inch

1920 x 1200

254 ppi

Sources: ZDNet, Apple, and Amazon. ppi = pixels per inch.

That puts the display in the ballpark of the iPad 2, while newer models from Apple and Amazon feature much beefier display panels. Google's smaller-sized Nexus 7 comes in at 216 ppi, and already has nearly the same number of pixels at 1280 x 800 (same as the 7-inch Kindle Fire HD). Apple's cheesy "resolutionary" tag line for the iPad 3 may sound awfully dumb, but when it comes down to it, the Retina display delivers. On paper, Amazon looks competitive in that department.

Secrets, secrets hurt someone
In choosing not to price at a significant discount to Apple and merely offering modest feature trade-offs at the same price point, Microsoft is going to have a tough time competing with the iPad directly in the full-sized tablet arena. Thus far, no rival has seen meaningful success, and the only players gaining any traction whatsoever have done so in the smaller-sized tablet market, most notably Amazon and Google.

Of course, the most important challenge that Microsoft will immediately face is content and app selection. Apple now has over 250,000 apps optimized for tablets, and Google continues to push its developers to do the same for their Android offerings, hoping to catch up. Microsoft has just 2,000 Windows 8 apps available in its Windows Store, a small subset of which isn't compatible with Windows RT.

A little bit of extra storage isn't likely to make up for the sparse app selection and poor display quality. Amazon has a much better shot at competing with the iPad with more apps, better display, and lower price point. Microsoft is going to get hurt.

It's been a frustrating path for Microsoft investors, who've watched the company fail to capitalize on the incredible growth in mobile over the past decade. However, with the release of its own tablet, along with the widely anticipated Windows 8 operating system, the company is looking to make a splash in this booming market. In this brand-new premium report on Microsoft, our analyst explains that while the opportunity is huge, the challenges are many. He's also providing regular updates as key events occur, so make sure to claim a copy of this report now by clicking here.

Evan Niu, CFA, owns shares of Apple. The Motley Fool owns shares of Apple, Amazon.com, Google, Intel, and Microsoft. Motley Fool newsletter services recommend Amazon.com, Apple, Google, Intel, and NVIDIA. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (5) | Recommend This Article (6)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 16, 2012, at 7:54 PM, Mayvau wrote:

    The Surface is scheduled to go on sale Oct. 26. If there is not a Nokia clone to this on Oct. 27 or soon thereafter then both MSFT and NOK need new marketing departments. And MSFT making it a Nokia Xbox 360 the sooner the better as well.

  • Report this Comment On October 16, 2012, at 8:31 PM, BeverlyB7 wrote:

    Note the following sentence from an article that I

    reference below:

    "The Surface, with two cameras and a USB port, will

    be Wi-Fi only. Microsoft has made no mention of a

    wireless-enabled version."

    From: http://www.livemint.com/Consumer/78U86YDZg0NNQzCDadXQIO/Micr...

  • Report this Comment On October 16, 2012, at 9:39 PM, Zinj wrote:

    Ummm...maybe I'm missing something here, but why would I buy this instead of a laptop/notebook? It's kind of like those guys who ride motorocycles with so many storage compartments and add-ons that it's less and less a motorcycle and almost a compact car.

    For the money, transport capacity and safety, I'd go with the compact car. For the fun, I'd go with a REAL motorcycle.

    Microsoft might have just tweened itself. Again.

  • Report this Comment On October 16, 2012, at 11:57 PM, lucasmonger wrote:

    The price is too high, smells an awful lot like the Zune. Some ways to save it

    1. Drop the price to match whatever Apple announces next Tues

    2. Hit the Apple App Store with Office 2013 for IOS with a $100 or higher price to tilt the playing field a little for people looking to use a tablet for business.

    Sadly, no cellular wireless version in sight. Once again, too little - too late Microsoft.

  • Report this Comment On October 17, 2012, at 8:58 PM, chilero wrote:

    You call it a "poor display quality" based solely on DPI. By using that terminology you are classifying it as a bad display. That is a hard call to make considering you have not actually seen it, nor put it side by side with the iPad 3. Once you do that you can then make the call on display quality.

    You failed to mention a couple of other features including the USB port and MicroSD slot. Another 64 gigs can be added for storing pictures and music. MS Office Home and Student is also included which is worth around $100.

    The big drawback is certainly the number of apps (which is being reported at around 3500, not 2000). They need to boost that number pretty fast and make sure that the "must have" apps are there is important.

    The price is cheaper than the iPad by about $100 but I would have liked to seen the price another $100 lower.

    I haven't ordered one yet but am seriously considering it. It looks like they paid attention to details on this with the angled camera, the kick stand and the touch cover.

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