Microsoft is charging way too much for its Surface tablet, and it’s doomed to come in last place, says Sterne Agee analyst Shaw Wu in a new note this morning.With Microsoft charging $499 for an intro level Surface without cover, and $599 for the Surface with its keyboard cover, Microsoft is going to be fighting Apple at the high end, while leaving room for Google and Amazon to clean up on the low end.
He writes, “Surface’s high pricing could prove to be a fatal mistake and relegate it to be a niche No. 4 or No. 5 player. We believe Nexus 7 and Kindle Fire HD will likely see considerably higher volume given their low $199 price points and stronger ecosystems with iPad retaining its commanding No. 1 position.” (He thinks Microsoft should have charged $300 for the Surface plus the cover.)
He also says that supply chain checks suggest Microsoft is only making 2-3 million Surfaces, which will automatically limit sales versus Apple, Google, and Amazon.
Despite the small sales, Microsoft will still take sales from its traditional partners like Dell, HP, Acer, and HTC.
In other words, Microsoft is going to fail to sell a lot of Surface tablets, while at the same time limiting the sales of its partners. Sounds like a mess, if Wu is right.
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