Microsoft Looks To Boost Sales With Price Cut On Surface Tablets
July 15, 2013

Microsoft Looks To Boost Sales With Price Cut On Surface Tablets

Enid Burns for Your Universe Online

Microsoft is cutting the price of its tablet line by up to 30 percent. The 32 GB model is now $349, down from $499; and the 64 GB Surface RT is now $499, down from $649. However, no price changes have been announced on the software giant's line of Surface Pro tablets at this time, PCMag reported.

The price cut could better position the tablet in the market, where Microsoft competes with Apple iPad and Android tablets from a number of manufacturers. Currently Apple iOS tablets hold 62.5 percent of the market, and Android holds 36.5 percent.

Reports show that Microsoft's total Surface sales have reached 1.5 million units, and Surface Pro sales have reached 400,000. The industry is divided on whether sales for Surface tablets are succeeding or struggling. The price cut could spur sales, though some may see the lowered price as a sign that Microsoft is admitting defeat.

The price change comes just a week after Microsoft CEO Steve Ballmer announced major management and operations changes across the company, Bloomberg News reported.

If the price cuts increase sales, Microsoft will be able to make up its profits by selling apps and services. The company is familiar with the razor blade model, which it practices in its video game division. The Xbox 360, as well as video game consoles from its competitors, are typically sold at a loss. The profit for the console comes from licensing on software titles. The Xbox 360 price tag has been lowered during the console's lifespan to encourage sales, and will probably see another price drop as the Xbox One release date approaches.

A lower price for Surface RT tablets might bring in more sales. An increased installed base could in turn attract more developers to release apps and software for the Surface platform. Microsoft needs to grow its ecosystem, by putting tablets in front of more users, in order for the platform to survive.

At the same time Microsoft is adjusting the price of its Surface RT tablets, BlackBerry is adjusting the price on its Z10 phone. The BlackBerry Z10 initially carried a price of $149. In the current market, with a contract, users can get the handset for as low as $49, BBC News reported. After the introduction of its new BlackBerry 10 OS in January, the company has struggled to interest consumers. BlackBerry faces many of the same challenges as Microsoft, where both companies are playing catch-up with a new operating system. BlackBerry sales continued to drop as the original smartphone platform held on to an aging OS. Now the manufacturer is almost like a newcomer in the market with its BB10 operating system.

"For Blackberry, it really bet the farm on its new BB10 operating system and it needs to regain market share in smartphones," BBC News quoted Tony Cripps, a telecoms analyst at Ovum. "In that sense, the Surface's success is perhaps not quite as important for Microsoft, but if they want Windows 8 to be a key driver for the future, they need to get it into the hands of as many people as possible."

The price drop might not be coming directly from BlackBerry, however. While tablets are typically sold at full price, even with wireless service, the carriers, who are willing to absorb the cost of the handset in order to gain or retain subscribers, typically subsidize handsets.