Back in June, when Microsoft announced plans for its Surface tablet, the company said the pricing for the initial model, the Surface RT, would be “competitive with a comparable ARM tablet.” At the time, that was a thinly veiled reference to the iPad, but thanks to Amazon’s new Kindle Fire HD lineup, the comparison just became more complex.

Amazon’s new tablet, unveiled yesterday, will start at $199 for a 7-inch version. The Kindle Fire HD with an 8.9-inch screen will run $299, and one with an 8.9-inch screen and 4G LTE wireless will go for $499.

Microsoft hasn’t yet announced pricing for the Surface. In a research note this morning, Shaw Wu, an analyst with the firm Sterne Agee, says the new Kindle Fire lineup changes the context for Microsoft’s pricing, whatever it turns out to be.

He writes, “We believe the pressure for MSFT to price its Surface tablet aggressively is now greater than ever. Initial press reports indicated a price point of $599, a premium to the new iPad, but we now believe it will likely need to price at $299 or lower to give it a fighting chance.”

In many ways, the Kindle Fire HD and Microsoft Surface are very different. For one, the Surface is is considerably larger, with a 10.6-inch display. The Microsoft device’s keyboard cover accessory is another differentiator.

In addition, the Kindle Fire HD will be ad-supported, with sponsored screensavers (shown at right) and an ad in the corner of the home screen.

On the other hand, the 4G option for the $499 Kindle Fire HD gives it an edge over the Microsoft Surface, which is expected to come with WiFi only to start.

Bottom line, many people will be choosing among a Kindle Fire HD, a Microsoft Surface RT, a Google Nexus 7 and an Apple iPad when it comes to their next (or first) tablet. And when it comes to pricing, Amazon just set a new bar, and it’s low.

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  • guest

    Yup, MS has a pretty big hill to climb now.

    • guest

      That’s what happens when you lose a decade head start overnight and on top of that decide you can wait three years before responding.

      • WillyThePooh

        If you look at MS history, their products are always several years behind Apple’s. But they could play catch-up pretty quick if they really want to.

  • Guest

    At $199, Microsoft Surface would be an easy buy. What’s all this about a $599 price point?

    • orcmid

      There are two models of Surface. One running Windows RT on Atom, one running Windows 8 Pro on x64. The higher price point, whatever it is, will be for the Pro model.
      I think Charlie Kindel’s observation is more likely. There is no way the Surface is a foray into a price war and saturation of the slate market. It is intended to be a class act and it will command some tolerable premium for those that not any-old Android box will do. How that goes shoulder-to-shoulder wtih the iPad, I have no idea. 2013 isn’t that far away and the answer will probably be in 2014.

      • WillyThePooh

        Surface RT runs on Arm, not Atom.

    • WillyThePooh

      More reasonable price will be between $399 and $499.

  • guest

    Wu needs to better understand what Slate is, how it differs from Fire HD, MS’s goal for the product, and the unit sales objectives Ballmer set. They shouldn’t have any trouble selling “a few million” (primarily to enterprises) at prices higher than Fire HD. Where Kindle’s pricing really has a profoundly negative implication is for W8’s already poor chances of breaking back into the mainstream of tablet sales via OEMs. If Amazon can sustain the impact of offering tablets at cost despite their already thin bottom line, it’s difficult to see how anyone other than Google is going to compete for what will ultimately become the high volume low price end of the market. And of course if MS didn’t anticipate this move from Amazon, as well as a lower priced smaller form factor iPad, then they weren’t paying attention.

  • Danny Arias

    I don’t see Surface RT needing to be at 199.00. Shoot, look what you get. You get a freakin free keyboard that doubles as a cover and USB port. Price it at 249.00 299.00. Plus you get office bundled in it. Let the toys play together. Surface is more for business. Either way. Surface Pro will be the game changer out of all of them. First tablet to run full blown Adobe Software and Warcraft style games. Price it at 800-900.00. Game over for the competition.

    • Howard Abraham

      Show me something where it says the keyboard is included. The fact that it is detachable and available in two models with a variety of colors says “optional accessory” to me.

      • Guest

        According to Todd Bishop of GeekWire, the keyboard could be included with the tablet. There’s also mention of a $199 price point, which would be excellent for the combo surface+keyboard.

        • nimatra

          wrong. totally wrong.

          • Todd Bishop

            Just to clarify, Microsoft hasn’t said definitively whether the keyboard will be included. The company says on the Surface product page that it “comes with” a keyboard, but that’s open to interpretation.

            In any event, a $199 price seems unlikely.

          • WillyThePooh

            It is come with keyboard cover. Whether it will include both touch and type keypads is the question. You may have to choose either one.

  • Charlie Kindel

    There is no doubt Amazon’s moves put pressure on Microsoft’s Windows 8 tablet plans. Do not confuse Surface with “Windows 8 tablet plans”.

    Microsoft’s Windows 8 tablet plans have, as a SMALL component, something called Surface. The mission of Surface is to be a “North Star” for Microsoft’s OEM partners to build better hardware.

    It is not Surface’s mission to be a “North Star” to accelerate the price erosion of Microsoft’s $11.4B/year profit engine called Windows.

    Microsoft’s partners will sell more than 200M (Stevie B claims 400; yea-right) Windows PCs next year. Even if Microsoft somehow sells 3M Surface units, it is a DROP IN THE BUCKET relative to that. And cutting the legs off of the rest of the PC ecosystem making the Surface significantly less expensive than what they can build Win8 ARM based tablets for would be insanity.

    Read this for more:

    • guest

      What Ballmer actually said was 400M Windows 8 phone, tablet, and PC devices combined, not 400M Windows PCs. Perhaps slightly optimistic, but certainly more realistic than 200M, even if you assume extreme PC weakness and very little traction on Windows tablets and WP.

  • davidds

    This holiday season belongs to tablets with PC sales seeing exponential decline. This is why it is important Microsoft Surface be competitive with other tablet offerings.

    The plethora of tablets (Nexus 7, Kindle, iPad3, rumored iPad-mini, etc) have put pressure on Microsoft’s Windows plans. Intel has already reduced earnings $1B vs expectations due to decreased demand for ultra-books and reduced orders for the back to school and holiday season despite the well-known availability of Windows 8 for PCs.
    Lacking quantity (only 4M units), a 7″ device, a retina-like display, and 3G/LTE connectivity will all be headwinds for Surface. Additionally, users will have to trade off battery life (ARM) for app ecosystem compatibility (x86) – a choice they don’t have to make with Android or iOS based tablets. And finally, pricing is an issue as raised in the article.
    I would agree with Charlie that Surface is not about *Microsoft* transforming the PC market into a mobile tablet market. Unfortunately, Microsoft didn’t realize this was a hill they needed to climb when engineering Windows 8. But it doesn’t matter – Apple, Google and Amazon are doing that anyway.

    • guest

      Surface’s success or failure is irrelevant in the bigger MS picture. Another visible failure will be embarassing but that’s about it. Most people are already preconditioned to expect failure from MS on anything new at this point. The contest that matters is W8’s success via OEMs in the tablet market. That’s the one that gives MS a shot at continued growth or ends it. But I can’t say I like their odds any better than you seem to. They simply waited too late. Not sure what you mean about MS not knowing the mobile tablet market was a hill they needed to climb when engineering W8. The original iPad shipped and was a runaway success relatively early in W8’s gestation. If MS can’t adjust course in three years, then it deserves to be disrupted and obsoleted by those who can.

  • Krishnan Gopalan

    I do not subscribe to the theory that the Surface is a project to inspire the OEMs. I think Microsoft would be foolish to overlook the deep service integration that players like Amazon,Google are building into their hardware. With Surface completely controlled by MS, they can build in the service integration like Skydrive, Xbox Games, Travel, Search, Movies (?), Books (from Barnes & Noble) much better. The OEM dependency has to be cut and let the innovation fly free. Google does not seem averse to co-opetition model with their OEMs. Why should Microsoft shackle itself?

    • Charlie Kindel

      Krishnan, what you are ignoring is the shackles Microsoft already wears. They are made of 11.4 billion dollars.
      Plus, I don’t see how you can ignore that in no universe will MS be able to build and sell more than 2-3m surface tablets next year. There is no supply chain that can support it, and no distribution (retail or online) for it. Even SteveB has indicated this.
      Lastly, look at my mullet post. I generously threw Office in the subscription package and it is still a weak business. And, as others have reminded me, MS already threw Office into RT for free. Over time MS can build up the services (experiences), but they are not ready. And, as they’ve demonstrated with Skydrive, they are willing to enable them on ALL devices, not just Windows based devices or even Microsoft built devices. That kind of scale can undermine Amazon, Google, and Apple.

    • guest

      MS is dependent on OEMs for the bulk of its revenue. Amazon and Google aren’t. Next…

  • Jacob Samples

    A 200 dollar difference for an LTE radio? Are you serious? That’s absurd.

    The Kindle HD and Surface are targeting two different audiences when it all boils down. People who want more are simply going to go with a Surface since it’s more “full fledged” then a Kindle.

    • Jacob Samples

      Add in the fact you can emulate Android apps on a PC and you will now have a touch screen…Yeah.

      • Charlie Kindel

        You still work at Microsoft, don’t you?

        • guest

          Yeah, because we all remember how courageously you rocked the boat while still employed there. Give the guy a break. Maybe he just legitimately likes it.

  • guest

    And MS is helping subsidize Fire’s aggressive price in return for it including Bing as the default search. So it a) assists in putting W-8 tablets at a competitive pricing disadvantage and thereby potentially loses out on a lucrative W8 license b) pays Amazon money out of pocket and c) promotes Bing, which in turn loses billions. And people wonder why MS’s stock price has already lost half its value under Ballmer and will lose the remaning 50% in even less time moving forward?

  • MichaelBrianBentley

    I don’t see them targetting the same markets, in the beginning. Microsoft may pay for some advertising for the same markets as Amazon, Samsung, or Apple, but MS is going to be more successful when they target what their existing customers want with highly integrated tablet operations. It’ll impact Apple sales some, but Apple isn’t driving that specific segment very hard.

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