|Surface Tablet Likely to See Minimal Holiday Sales, Says Analyst|
By Christopher Witrak OCT 16, 2012 1:05 PM
Microsoft positioned to do well in the enterprise market.
The PC market had a good run from 2005 to 2008, driven by the consumer market. Individuals would buy a second or third PC for their household. However, these second and third PCs are being replaced by tablets, driving the decline of PC in the consumer market. This is why Microsoft obviously needs to get involved with tablets.
Second and third PCs are not necessarily used for productivity purposes, though, like using Excel for accounting and business work. These PCs are used as devices for tasks such as accessing the Internet, multimedia content, and email. With tablets replacing these computers for these purposes, I don’t know how compelling Microsoft Office RT for tablets will be for the consumer market.
I think initially the consumer market will be very tough to break into for Microsoft with the Surface tablet. Especially with an iPad Mini being introduced, I don’t see how they can compete on price.
The price of the Surface makes it more expensive than its counterparts. According to ZDNet, Microsoft briefly revealed on its website today the prices of the Surface tablet before pulling down the information.
The Microsoft website listed the 32GB base model of the Surface RT tablet at $499. Tablets with the black multi-touch TouchCover keyboard feature increases the price to $599, and the 64GB tablet with a black TouchCover keyboard costs $699. The iPad Mini will likely have a price tag of $299. However, the 32GB Surface RT is cheaper than Apple's 32GB Wi-Fi iPad, which sells for $599. Kim also cited Amazon's (NASDAQ:AMZN) Kindle Fire as another tablet difficult to compete with on price. It sells for only $199. The larger, 8.9-inch Kindle Fire tablets cost $299. Plus, Amazon already holds a large subscriber base and a lot of content for its subscribers. When customers shop on Amazon, they "always see advertisements for the Kindle tablets when they shop."
Despite the competition, Microsoft may capture a larger portion of the tablet market. The International Data Corporation, or IDC, projected in a September forecast update that Microsoft will increase its share of the tablet market from 1% to 4% by the end of 2012.
Customers will likely not buy the tablet right away and will want to try it out at the store; it does not have the same reputation as the iPad or the Kindle. Since Microsoft has a limited retail distribution, it will limit sales opportunities because some potential customers won't be able to visit a store and test it.
The advertising dollars being spent are more likely for branding and marketing. The ads won’t generate direct success for the holiday shopping season. I don’t think that’s Microsoft’s intent either, and it probably just wants to spread awareness about the product above all else.
Microsoft wants most consumers to remember the Surface exists as an option next time they shop for a tablet six months or a year from now.The IDC report also shared this view, stating, “[W]e expect shipments to remain low for the fourth quarter as high prices and consumer confusion around these devices will limit their appeal.”
Individuals may use a Windows 8 product in their work environment, like it, and then purchase a Windows 8 tablet for their household needs. This transition will likely take one to two years to occur, though.
Whether or not Microsoft can leverage its Window 8 products in enterprises to gain a foothold in the consumer market will act as a better indicator of success than the initial performance of the Surface tablet in the consumer market.
Microsoft working through the enterprise market seems like the best plan for Microsoft given the competition in the consumer market.
(See also: Microsoft Says No to Bargain Bin for Surface, Aims to Fight iPad Head-On and Tech News: Microsoft Leaks Prices for Surface RT.)