There are a lot of mispriced products out, and their cost will do nothing more than hurt sales. The Surface Pro tablet, which Microsoft announced pricing details for today, is a good example.
The Surface Pro is the long-awaited Microsoft tablet that runs x86 Windows 8 and thus all of the Windows software out there that normally runs on the desktop. It costs $899 for a 64GB model and $999 for a 128GB model. For much less than that, you can buy a loaded real PC and it will do a lot more, albeit in a stationary location.
This tablet will compete with the iPad, the Surface RT, the Nexus 10, and various tablets from Acer and the likes.
After playing with the already pricey $499 Surface RT, I do not see why anyone would buy the even more expensive unit unless he or she was going to use it as an odd sort of desktop replacement. And for most users, the 32GB Surface RT should suffice once it is equipped with its version of Microsoft Office. The RT version should get much better battery life too. The 32GB Nexus 10 is also $499, meaning that this price point is probably a baseline cost of parts for all these machines.
I've written about this before and I'll keep writing about it. These companies need to price ahead of the curve and take a small beating for a while until they gain market share. Eventually, the product will ramp and become cheaper to make. This sort of aggressive pricing seems to have been forgotten by the tech community. It was referred to as the learning curve and the hard disk business lived and died by it for a couple of decades.
If Microsoft was serious about making inroads to the business, it would work like this: Microsoft makes, say, a $50 profit on each unit sold—about a meager 10 percent. This is at current volumes with current technology. With Moore's law in place, the cost to make the product decreases by 50 percent every 18 months. If the bag of parts for the product is $300, it would be $150 in 18 months and $75 in 36 months.
An aggressive learning curve price for the product would immediately drop from $499 to around $250 then $200 in advance of the cost falling drastically. If Microsoft were serious about decimating the competition, it would dump the price to $99, which is where all these devices are headed.
In the next five to six years, you will be able to get a powerful tablet for $99 and a good, unlocked smartphone will be $40 max. Print out this column and prove me wrong in five years.
Pricing in advance of these eventual price drops is the only way any company can unseat the Apple iPad, but nobody is willing to step up to the plate and actually do it. The fear is that the item will sell like crazy, costing the company money, and the dropping cost of the product will not fall fast enough to keep it from going broke.
Unfortunately, the argument is moot since both Microsoft and Google could afford to ride a loss on these items for decades, but neither will pull the trigger on the idea. Thus Apple wins.
Check out our complete Windows 8 coverage.
You can Follow John C. Dvorak on Twitter @therealdvorak.
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