No one's buying Surface RT tablets, so Microsoft's (NASDAQ:MSFT) fire sale is intensifying.
The software giant slashed prices of its poor-selling tablets running its scaled-back Windows RT operating system by as much as 30% on Sunday. The $499 model that packs 32 GB of memory (though just roughly half of that is available for use) is now $349, and the more functional 64-gigabye model is going from $599 to $449.
The price cut isn't a surprise. In fact, last month I predicted that a July price cut was in the works. The June promotion where Microsoft was offering a free keyboard cover had to be a prelude to a bigger price cut.
Microsoft made a brutal mistake in trying to match Apple's iconic iPad on price when it introduced the Surface RT late last year. Despite a snazzy marketing campaign and the novelty of magnetically clickable keyboard covers, why would anyone take a gamble on the unproven Windows RT ecosystem when Apple's iOS has broad developer support and a market-defining tablet that just flat out works?
When industry tracker IDC reported that just 200,000 of the nearly 50 million tablets shipped during the first three months of the year were Windows RT devices, the game was over. You don't bounce back from gnawing on just 0.4% of any market.
Microsoft has moved to actively promote education market discounts. It's practically given them away to developers and offered healthy bounties for popular app makers to support Windows RT. However, it was never going to convince consumers that the Surface RT was as valuable as an iPad, and things only got worse when the even more expensive Surface Pro systems that run the real Windows 8 were introduced a few months later.
Things could've been so different if Microsoft had priced the Surface RT aggressively from the start. Maybe it would've taken off this holiday season, setting itself apart as a thrifty iPad alternative. However, Microsoft stuck to a high price, likely in an effort to not scare away any hardware makers from supporting Windows RT.
In the end, Microsoft was treated to the same result. Nobody wants to make what nobody wants to buy. It remains to be seen if this is a legitimate price cut or its Microsoft is trying to clear out cobweb-collecting inventory ahead of a rumored new Surface RT model. Either way, it's selling cheaper tumbleweed in this tablet platform ghost town.
Microsoft just better hope that it doesn't get the pricing wrong this time around, too.
Longtime Fool contributor Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple and Microsoft. 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.