We’ve been waiting with eager anticipation to find out how much Microsoft plans to charge for its Surface tablet computer, set to debut on October 26th. Well, as usually is the case when it comes to these types of gadgets, word is starting to leak out.

Citing an “inside source,” Engadget reports that the Surface for Windows RT will debut at a rock bottom price of $199. Sounds too good to be true, doesn’t it?

Well, we’re a bit skeptical of the report, in part because Microsoft said at the unveiling back in June that the Surface “will be priced like comparable tablets based on ARM.” We took that to mean more in the $600 range that you see for the latest generation iPads.

We’d love to see a $199 Surface, in part because it would radically undercut the iPad (not to mention many of Microsoft’s own hardware partners). See our previous report: Acer CEO warns Microsoft to ‘think twice’ about Surface.

A $199 price also would put it in direct competition with the Kindle Fire and Nexus 7, both Android-based devices.

One thing is certain.

Microsoft needs to do something bold in order to regain its mojo in the tablet arena. And one way that it can woo customers — many of whom already have purchased iPads or Kindle Fires — is to compete aggressively on price. We’ve talked repeatedly about Microsoft’s need to offer the device at a discount on the GeekWire podcast in recent weeks, but the indications seem to point that the Surface (with its TouchCover) would be more in the range of an iPad.

Microsoft declined to comment on the Engadget report. Maybe we’ll just have to wait another couple months to see where pricing actually ends up.

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