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Microsoft Surface heads to more stores, but is price drop ahead?

December 11, 2012|By Chris O'Brien
  • Microsoft plans to sell the Surface tablet at more stores.
Microsoft plans to sell the Surface tablet at more stores. (David Paul Morris/Bloomberg )

Though Microsoft's Surface has been on sale for several weeks, it's been hard to get a clear read on how this critical product is doing. For now, Microsoft isn't providing any numbers, so everyone is looking elsewhere and reading tea leaves.

On Tuesday we got two opposing indicators, one from Microsoft and the other from a blog that focuses on consumer deals. 

Let's start with Microsoft. The company announced it was expanding this week the number of stores that sell the Surface tablet. Until now, you could have bought them only online or primarily at one of the Microsoft stores.

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Microsoft said it had originally planned to expand sales and distribution to more stores next month. But the company contended there was such a clamor for the gadgets that it decided to move up its timetable to this week. In addition, some temporary holiday stores that Microsoft created are going to be converted to permanent stores.

“The public reaction to Surface has been exciting to see. We’ve increased production and are expanding the ways in which customers can interact with, experience and purchase Surface,” Microsoft Surface general manager Panos Panay said in a news release.

All well and good. Unless you read this piece from Dealnews, which cited a report that Surface sales are well below expectations: 

"According to estimates from Boston-based brokerage firm Detwiler Fenton, Microsoft is on track to sell between 500,000 to 600,000 Surface RT tablets in the December quarter — far below its expected sales of 2 to 3 million."

The Dealnews story noted that part of the problem might be the limited availability of the Surface, which it seems Microsoft is on its way to addressing with its Tuesday announcement. 

The other issue remains price, according to Dealnews: "And at a time when $199 mainstream tablets are becoming the norm, the Surface RT's high $499 price tag is undoubtedly hurting it."

Before Microsoft launched the Surface, some observers called for the company to sell it at a radically reduced price as a way to generate excitement among consumers and get a foothold in this important market to attract the attention of app developers. 

Now, Dealnews speculates that such a price drop might be coming. Dealnews projected that a backlog of inventory will persuade Microsoft to drop the price after it introduces the higher-end Surface Pro at $899 next month. To support that argument, Dealnews pointed to the BlackBerry Playbook tablet, which saw price cuts of 38 percent within a few months of launch when the units didn't move. 

So far, Microsoft is making no concessions. "Microsoft is showing no signs of discounting its tablet in the near future. In fact, during the biggest shopping days of the year, Black Friday and Cyber Monday, Microsoft discounted everything but the Surface RT," Dealnews said.

But that could change quickly in the coming months, Dealnews said: 

"With two tablets on the market, Microsoft would be wise to discount its entry-level Surface RT tablet, so at the very least we recommend holding off till the Pro's debut before making any purchasing decisions. If you still can't wait till March for the first deals, then shoppers should wait until the Surface RT has better distribution. In other words, wait until you can walk into a Best Buy and see it in person, as third party retailers are more likely to discount the tablet (or bundle it with a gift card) than Microsoft."

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Follow me on Twitter @obrien.

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