iPad looks set to retain pricing edge over Windows 8 tablets

by David Needle

May 18 2012

Microsoft's Tami Reller showed off a prototype Windows 8 tablet at the Consumer Electronics Show earlier this year. (Photo: Microsoft)
Microsoft's Tami Reller showed off a prototype Windows 8 tablet at the Consumer Electronics Show earlier this year. (Photo: Microsoft)

Microsoft has a lot riding on the first wave of Windows 8 tablets scheduled for release this fall.

But unlike the notebook and PC areas, where Microsoft’s hardware partners compete effectively against Apple products on price, tablets are a different game. 

The first iPad was released in 2010 at $499 (well below what many analysts had expected) and Apple’s maintained that price through two successive generations while keeping the iPad 2 on the market at an even lower $399. 

Several reports this week indicate the first Windows 8 tablets won’t be price competitive with the iPad, though it’s not known how much more they might cost. From an IT perspective, a $599-$699 price range might not be a deal killer and Apple charges quite a bit more for iPad models with additional storage and cellular connectivity. For example, the 32GB iPad is $599 and the same model with cellular is $729. 

Windows 8 tablets built on the ARM processor will also include a version of Microsoft’s Office suite. 

The research firm IHS is forecasting an average selling price of $610 for ARM-based tablets, but analyst Rhoda Alexander says there’s a lot of leeway there. 

“You’ll see a whole spread of price points higher and lower. And I expect some vendors will keep their price low to match the iPad even if it means a tighter profit margin,” Alexander told TabTimes. “There’s no question Microsoft wants products out there, media tablets that are priced competitively and we expect prices to drop quickly after the first release.” 

Microsoft's licensing fees an issue?

Digitimes, a Taiwan-based publication that tracks supply chain manufacturers, says Windows 8 tablet makers are having trouble keeping costs down for 7- and 10-inch models. The target price for the total bill of materials is $150-$200 and $300-$350 for the two models, but the Digitimes article claims Microsoft’s licensing fee is pushing it higher than that. 

However, Digitimes has a spotty track record and its claim that Microsoft is demanding a license fee of $90-$100 for Windows 8 has been called into question since Microsoft reportedly only charges about $50 for PC licenses and $30 for Windows Phone 7 devices. 

Whatever the case, it is a cost Apple doesn’t have to incur for its internally developed iOS. Likewise, Android is licensed free to smartphone and tablet makers. 

Analyst Nathan Brookwood says the higher license fee, if true, could be a function of the fact that Microsoft is including Office. The bigger issue from his perspective is how high Windows 8 tablets will be priced. 

“If I look at an iPad for $499 and a Windows 8 tablet is $599, well, if I need Office on that device maybe I can rationalize it. It could be a non-issue for IT, unless they have a better volume licensing deal with Microsoft already,” said Brookwood, who heads the Insight64 research firm.

“When you’re coming into an established market it’s pretty important to match the leader’s pricing or have some really compelling story as to why you don’t,” he added. “Outside of bundling Office, Windows 8 tablets clearly don’t have that story.” 

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Comments

 
  • David Needle
    2 years 4 months ago
    Hey good comments Richard. I guess we'll see what happens. I do think a lot of the initial Windows 8 tablets will be targeted at business in hopes the IT folks will want to stick with Microsoft. Agreed, it's hard to think of why many consumers would pay a premium for a non-iPad device unless there's some significant hardware innovation coming that we don't know about yet. Apple's pricing has been brilliant, especially having the foresight to lock in component supplier commitments at low prices for volume purchase guarantees.
  • autotraveler
    2 years 4 months ago

    At these prices, the idea of a Windows 8-based tablet is a total non-starter in the consumer tablet space. Hasn't Microsoft learned anything from the failures of Motorola, Samsung, RIM, and especially HP? Windows 8 tablets will get no measurable traction among consumer unless it is priced under the iPad.

    I am not any sort of Google fanboy and acquired an iPad 2 a year ago when Best Buy junked out a PC laptop under my extended warranty. I don't think it is a great device but it and the New iPad is the best currently available tablet. With the iPad 2 now available for $399, any non-Apple tablet has to be priced under $399 in a meaningful way, $299 maximum, to expect to be adopted by consumers, otherwise they will simply buy an iPad.

    I know what you're going to say, "but it runs Windows, that I can run my Windows applications like Office." NOT!

    I have a keyboard for my iPad 2 and even with it, a tablet is not up to the task of being a laptop substitute and I can't imagine that a Windows 8 tablet would be a true laptop substitute.

    Microsoft hasn't learned from their previous mobile-focused operating systems. How successful has the launch been on the Nokia Windows-based phones?

    I predict a year after the launch of the Windows 8 tablets we'll all be looking back at the failure once again, of Microsoft's tablet plan and its hardware partners will be closing out their tablets for less than the price of a Kindle Fire or Nook Tablet (which right now is $199 but by then will be less).

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