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TheStreet Open House

Microsoft Surface Pricing: An Impossible Task

Stock quotes in this article: MSFT, AAPL, ARMH, GOOG, AMZN, INTC

NEW YORK ( TheStreet) - There's no good way to say this, but whatever prices Microsoft (MSFT)chooses for its upcoming Surface tablets - those prices will be wrong.

What I'm talking about is the price Microsoft needs to charge to win over the hearts and minds of the computer buying public.

Microsoft's first hurdle is Apple (AAPL). The Redmond, Wash.-based firm has priced its Windows RT tablets (powered by mobile ARM (ARMH)-based processors) in a similar range to Apple's iPads. It's the same tactic that manufacturers of early Android tablets used. Unfortunately, it didn't work out so well for Android devices. They have been innovative - and in some cases offer better hardware than iPads - but the software is still being changed every few months.

Add to that the constantly growing user base for iOS products, and all the apps available for that platform - and Android tablets haven't been a giant success. Except, of course, for Amazon's (AMZN) Kindle. Priced correctly at $199, Amazon immediately hit the industry's "sweet spot." Others, now, have followed that pricing strategy.

So, Apple realized there's a market for cheaper tablets with smaller screens. That's why there are all these rumors about an iPad Mini in the near future. A device with a 7-inch screen (like the Kindle Fire and Nexus 7) - possibly priced as low as $250. I've heard from lots of people who are waiting to see what Apple comes up with before buying the new $199 Kindle. Or a $500+ Microsoft Surface.

I can't believe the buying public will know/care/understand the finer points of difference between Apple's iOS and Microsoft's Windows RT. Yes, on paper, Microsoft's new OS should be able to do a lot more real computing. But, is that what consumers really need or want? Or, is it what the market will support?

And we're discussing only the new Windows RT offerings. We have no idea how Microsoft (and others) will price new hardware that runs on the full, Windows 8 operating system (and Intel (INTC) processors). Those devices will be able to do more than Win RT devices, but will probably also feature premium prices. Who knows if the marketplace will support that?

All of this really hinges on the new Microsoft software. Will the buying public embrace Windows 8 and Windows RT? Will they want to buy new hardware to take advantage of the new features? Will Microsoft start reversing Apple's stranglehold on the marketplace?

The most important factor in this mix; will enterprise want to switch to Microsoft's new offerings? Or, have they just finished upgrading from the ancient (but still useful) Windows XP to Windows 7? For them, an expensive Windows 8 upgrade could be years away. And don't forget; enterprise is where the bulk of the computer buying occurs.

We will know soon enough.

--Written by Gary Krakow in New York.

>To submit a news tip, send an email to: tips@thestreet.com.

Gary Krakow is TheStreet's senior technology correspondent.

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