Bloomberg News

Microsoft Prices Surface Starting at $499 to Rival IPad

October 16, 2012

Microsoft Prices Surface Tablet Starting at $499 to Rival IPad

Microsoft Corp.'s Surface tablet computers in Los Angeles. Photographer: Jonathan Alcorn/Bloomberg

Microsoft Corp. (MSFT:US) will sell its first computer, a device called Surface RT, for as little as $499 as the software maker pushes into the tablet market dominated by Apple Inc. (AAPL:US)’s iPad.

The first iteration of the device, powered by a chip with technology from ARM Holdings Plc (ARM), will be available as a 32- gigabyte model for $499, the company said in a statement. With a black cover, it will cost $599, and a 64-gigabyte version will be $699. The machine goes on sale Oct. 26, and Redmond, Washington-based Microsoft will take a limited number of early online orders starting at 12 p.m. New York time today.

The world’s largest software maker (MSFT:US) needed a device priced under $500 to lure customers away from the iPad and to compete with Amazon.com Inc. (AMZN:US) and Google Inc. (GOOG:US), which are pushing prices lower in the tablet category, said Bob O’Donnell, an analyst at market-research firm IDC. The latest version of the iPad starts at $499 for a 16-gigabyte device that, like the Surface, uses a Wi-Fi short range wireless connection.

“Everything is pulling tablet prices down to below $500, so anything over $500 -- that is a tablet that is going to look expensive,” he said.

The snap-on cover, which includes a full keyboard, is one of the key features that make the Surface different from other tablets. Customers can buy the cover for $119.99 in black, white, magenta, cyan and red, according to the statement.

New Windows

Surface will be sold in Microsoft’s retail stores, including 34 temporary locations set up for the holidays. They’re also available online in the U.S., U.K., China, Germany, France, Hong Kong, Australia and Canada.

The tablet has a 10.6-inch display and will run the new version of Microsoft’s operating system, which also goes on sale Oct. 26.

The software maker (MSFT:US) is stepping up its assault on the tablet market as consumers choose the devices over laptops, weakening personal-computer sales and curbing Windows revenue. In the third quarter, total global PC shipments fell 8.3 percent from a year earlier to 87.5 million, market-research firm Gartner Inc. said last week.

Since the iPad went on sale in April 2010, Apple has led the tablet market, which is predicted by DisplaySearch to reach $63.2 billion this year. Apple has 61 percent of the market, according to Gartner. Apple may introduce a smaller, less expensive version of the iPad at an event on Oct. 23, a person familiar with the matter said last week.

Apple will probably price the iPad mini at $299 or $349, said Shaw Wu, an analyst at Sterne Agee & Leach Inc. An older version of the iPad sells for $399 in the U.S., according to the company’s website.

Google’s Nexus 7 tablet and some versions of Amazon’s Kindle Fire with 7-inch screens cost $199. Amazon also sells a Fire with an 8.9-inch screen for $299.

To contact the reporter on this story: Dina Bass in Seattle at dbass2@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net


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