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Has Microsoft Learned Nothing?

By Daniel Sparks - Sep 24, 2013 at 8:00PM

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The new Microsoft Surface family of tablets is officially here, and it doesn't look good.

The new Microsoft (MSFT -0.26%) Surface family is official, and it doesn't look good.

The updates
On Monday, the company announced the Surface 2 and the Surface Pro 2.

The new Surface 2 and Surface Pro 2. Source: Microsoft News Center.

The Surface 2, running Windows RT 8.1, has the most dramatic changes of the two updated product lines. Most important, it sports a much faster Tegra 4 processor to help the original Surface RT's performance issues. And battery life was boosted by 25%, even with a thinner and lighter form factor.

The Surface Pro 2, running Windows 8.1 Pro, kept the same form factor as its predecessor. But the internal updates provide dramatically better performance. Equipped with an Intel Haswell processor, graphics performance and battery life are up by 50% and 75%, respectively.

So far, so good. Until we get to pricing...

Stubborn, stupid, or crazy?
Microsoft's decision to continue to compete in the tablet market after a $900 million writedown of unsold Surface inventory earlier this year was surprising in and of itself. But its pricing on the new line-up is borderline crazy.

The Surface 2 lineup starts $449 -- just $50 less than its predecessor's original price and $100 more  than the original Surface RT after July's $150 price cut on the device.

The Surface Pro 2 starts at $899 -- the same price as the original Surface Pro and $100 more than the first version's price after its early August price cut.

Hello, Microsoft? Don't you recall that nearly $1 billion writedown and those major price-cuts earlier this year?

Even Window's guru Paul Thurrott was surprised: "Microsoft has unexpectedly held firm on pricing, suggesting that it hasn't completely learned from the mistakes of the past."

Terrible timing
While pre-orders begin today, shipping begins on Oct. 22. Of course that falls directly in the time frame for Apple's rumored iPad event.. On Oct. 15, Apple is expected to reveal a fifth-generation iPad and a second-generation iPad Mini with a Retina display. If Apple maintains current pricing on new iPads, the fifth-generation iPad will start at $499 and the iPad Mini will start at $329.

Microsoft's rumored 8-inch Surface tablet wasn't revealed at the event. As the first small tablet from Microsoft, it's an important missing piece to Microsoft's tablet lineup. But after Microsoft's announcements of overpriced tablets, and considering the formidable competition in the sub-8-inch tablet segment, the company hasn't given investors any reason to expect that the 8-inch tablet will improve Microsoft's poor performance in the category.

Price matters -- especially in tablets. Is there any hope for Microsoft's tablet segment?

Fool contributor Daniel Sparks owns shares of Apple. 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.

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