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Analyst says Surface could hurt Ultrabook, Windows 8 tablets

MSFT subsidies could mean US$499 Surface price and death for Android tablets

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Taiwanese analyst outfit Trendforce thinks Microsoft’s forthcoming Surface devices will cannibalise the market for ultrabooks, put price pressure on Android tablets and confuse consumers.

The analysts’ WitsView service recently published a note in which research director Eric Chiou says that Surface devices’ 32GB of storage is a higher spec than that on most ten-inch Android tablets, justifying a higher price of US$599.

At that price Chiou feels Surface will “inevitably cannibalize ultrabook sales” and goes on to say that “Microsoft may not be pleased to see a competition between its own products.” Consumers may also be confused by the overlapping prices.

One way out, Chiou suggests, is for Microsoft to dip into its colossal trove of cash and subsidise Surfaces so they emerge to US$499, a ploy he says the company has done before when it took XBOX to market. The results of that subsidy program speak for themselves, as XBOX is now the number one console. A US$499 price would also slot surface in nicely between the iPad and ultrabooks.

Such subsidies could be bad news for Android tablet players, with Chiou offering the following scenario:

Surface may stand out in the market by sacrificing profits or getting subsidies from Microsoft, while the remaining brands are unlikely to possess the ability and will to do so. Undoubtedly, customers are expected to take the price of Surface as a benchmark for every single prospective Windows 8 tablets; that is, Microsoft’s Surface with an intentionally lowered price may decrease the price flexibility that affects its brand partners’ earning capacity, and even further impact their desire to launch new products.

That’s not all good news for Microsoft, as fewer or less-happy tablet-makers also means fewer potential Windows 8 tablet manufacturers.

WitsView nonetheless predicts that of the 94 million tablets it expects to be sold in 2012, four million will run Windows 8.

That’s decent uptake, however, as the new devices are tipped to emerge on October 26th. If we work on crude averages alone, without accounting for sales spikes pre-Christmas, four million Windows 8 slabs in sixty-odd days will represent at least 15% of tablets sold in the most-frenzied months of the selling cycle. ®

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