There was plenty of Monday morning quarterbacking taking place around Microsoft's (News - Alert) $900 million write-down on the existing Surface RT tablet, with pundits going so far as to blame advertising – c'mon, when has Redmond ever done an exciting ad? The simple answer goes to a lesser ARM (News - Alert) implementation and no applications for the ARM RT codebase. But I'm willing to bet it's a bit more complicated.
In the big picture, Microsoft needed to put down some stakes in the tablet arena and spark up touch screen applications for a redesigned Windows 8. The first generation Surface Pro and RT tablets came in at high price points. The Surface Pro, designed to run unmodified Windows 8 on an Intel (News - Alert) chip, succeeded in demonstrating that full-blown business applications could be delivered on a tablet without compromises (other than screen size).
The Surface RT was aimed at home/consumer users – a distinction that too often translates to "Let's make it slower, cheaper, and dump a couple of hardware features." At an initial list price of $499, the RT was cheaper than the $1,000ish Pro, but not cheaper than the entry-level Apple (News - Alert) iPad or Android alternatives.
Last week, Microsoft dropped the RT tablet to $349 list, $449 if bundled with a touch keyboard/trackpad cover. Compare that to Windows 8 laptop choices between $300 to $450 and the laptops win hands down with bigger screens and hard disk storage.
If Microsoft is really serious about Surface RT as an entry-level alterative to a full-blown Windows platform – tablet or laptop – it is going to have to get very aggressive on pricing. A complete RT "system" with tablet and keyboard should come in at $250, putting it into the same price range as Google's (News - Alert) Chromebook alternatives.
With Surface Pro at $1,000 and a complete RT solution at $250, Microsoft would then have enough price and feature room to play with to offer a "Surface Plus" model, taking advantage of the newest wave of low-power/low-cost Intel chips. A Surface Plus would come in at around $500-$600 with keyboard and offer the full Windows 8 experience, just like the Pro. It may even be the Surface Pro, but just rechipped and maybe with a slightly different design to lower the production cost.
A Surface Plus with all the essential functionality and specs of the Pro would open up the high-end/ business market for a new Surface or two with bigger screens and whatever the fastest mobile Intel chip is available this season. The combination would allow Microsoft to keep Chrome and Chromebooks from becoming a viable threat on the low-end/entry-level section of the market and offer a price and functionality competitive option to the Apple iPad family in the mid-tier market.