Microsoft Surface 199$ gamble

So if the news on the web is true then the new tablet kid on the block AKA Microsoft Surface is going cheap. Engadget and CNet are reporting that it will be around $199. Surprised! I know I am. When it was launched my gut estimate was around $499 for lowest Windows RT model going up $1500 for professional level high end model. $199 look really puny and I look like a fool. So what might the reason behind the magical $199 mark (magical because Nexus,Kindle & Nook are at same price range). Most will agree that Microsoft will not make much money at $199 price tag. Google hardly makes anything from 7″ Nexus 7 and Surface is going to have 10.1″ LCD. So profits on hardware seem to be out of question. Which means there must be a long term motive and here’s what I think it is. 

Microsoft is new in the already crowded market. That includes both hardware and software. So to take a slice out of it, the viable option for them would be to sell their wares at cheap. The target would be the large not-so-niche market. This would increase the user base. If the user base increase, other manufacturers can follow the suite and launch their own versions of Windows tablets. That means more options for end users and more Windows tablets in the market. Microsoft can licence the Windows copy on each of them and earn revenue. Just like what it does currently. IMHO, that’s the ultimate goal. Besides you always have the app store revenues from selling apps, music, movies, games etc. If down the line Surface starts making profits, that’s an added bonus. Launching Surface at cheap is just to kick-off things.

Let’s see how this thing shapes up. 😀

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