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Microsoft Fights iPad Using Apple's Strategy

Stocks in this article: MSFT

NEW YORK ( TheStreet) -- Microsoft (MSFT) has unveiled the Surface tablet, its first shot at a Windows 8 tablet, at an event in Hollywood Monday. The Microsoft Surface tablet will come in two variants, powered by Windows 8 RT and Windows 8 Pro. The Surface tablet will compete directly with Apple's (AAPL) iPad and Google's (GOOG) Android tablets, and going by the initial impressions, it could be a huge hit.

Check out our complete analysis of Microsoft

Microsoft Surface tablet

By launching its own tablet, Microsoft will not only earn significantly higher profits, but also push the envelope in terms of design and user experience. Now other tablet manufacturers are expected to make their own Windows 8 tablets, making them more competitive with the iPad and Android-based tablets.

Microsoft hasn't revealed the pricing for either tablet or any detailed specifications, but the Windows 8 RT variant is expected to be more like a traditional tablet while Windows 8 Pro variant could double as a notebook. Microsoft also unveiled some accessories, like a "Type Cover," which acts as a magnetically attachable smart cover with a built-in keyboard.

By not focusing on the hardware specs and having just two simple variants, Microsoft is pushing user experience, just like Apple. Microsoft indicated that the pricing will be such that its OEM partners will have cost and feature parity with their devices, which indicates that it is wary of discomfiting its partners by pricing its tablets too low so as to make their devices uncompetitive on price.

It's interesting how Microsoft decided to change its strategy from a software-licensing-only model to one in which it produces the flagship hardware benchmark, which its OEM partners can then improve upon.

We currently have a $40 Trefis price estimate for Microsoft , which stands nearly 30% above its market price. Windows 8 is expected to be a crucial release, as Windows accounts for nearly 25% of Microsoft's overall value.

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This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

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