Microsoft is in trouble. Despite its aggressive marketing campaign, sales of its new Surface RT tablet - which the company boasted would combine the best elements of a laptop and a tablet - are well below expectations. According to estimates from Boston-based brokerage firm Detwiler Fenton, Microsoft is on track to sell between 500,000 to 600,000 Surface RT tablets in the December quarter - far below its expected sales of 2 to 3 million.
However, Microsoft's troubles could spell good news for consumers, as high inventory of an ailing Surface RT could spark a flurry of deals. But why is Microsoft's much-hyped Surface RT tablet struggling in the first place?
For starters, Microsoft has been very controlling about how its Surface RT tablets are sold. At the moment, they can only be bought directly from the Microsoft Store online, at pop-up boutiques, or at Microsoft retail stores. Lukewarm media reviews have also chilled shoppers' wallets, as they turn to other tablet manufacturers (with well-established app stores) for their needs.
But most importantly, in the weeks since its debut, we've yet to see a deal on a Surface RT tablet. And at a time when $199 mainstream tablets are becoming the norm, the Surface RT's high $499 price tag is undoubtedly hurting it. Especially since we've seen discounts on every other tablet currently on the market, including the latest batch of Apple iPads.
Surface RT Price Could Drop 38% Within 2 Months
So when can we expect to see deals on Surface RT tablets? To find out, we turned to the Blackberry Playbook. Now, we are in no way implying Microsoft is in the same boat as RIM, but its Surface RT Tablet could wind up walking down the same plank as the Playbook.
Like the Blackberry Playbook, the Surface RT tablet has debuted to mediocre reviews. However, whereas the entry level Playbook dropped 6% in price six weeks after its debut, Microsoft is showing no signs of discounting its tablet in the near future. In fact, during the biggest shopping days of the year, Black Friday and Cyber Monday, Microsoft discounted everything but the Surface RT. (By comparison, Apple, Barnes & Noble, Best Buy, and Amazon slashed prices on pretty much every tablet on the market.)
While a potential 6% price drop may sound like a good deal for some, true bargain hunters may want to hold off a little longer, as just five months after the Playbook's debut, the 16GB Playbook dropped 38% in price. Even the higher 32GB model dropped an impressive 33% in price during the same timeframe. And the deals only got better from that point forward. In fact, in an effort to move inventory, some retailers, like Office Depot, began discounting the Playbook and bundling it with $100 gift cards. Again, this was just five months into the tablet's lifespan, which means we could see hefty discounts on the Surface RT as early as March 2013.
And while it's anyone's guess just how low the Surface RT tablet can fall, keep in mind that last month we listed the 16GB Playbook for an all-time low of $130. That's a whopping 74% off its initial list price. (Granted, it took 19 months to reach this low.)
What's Next for Surface?
Microsoft has confirmed it will debut its Intel-powered Surface Pro tablet some time in January for a starting price of $899. Price-wise, that puts it higher than every mainstream tablet available today, higher than many of today's ultrabooks, and considerably higher than many of the Windows 8-powered laptops we've seen these past few weeks.
However, the Surface Pro tablet is a different beast altogether. Unlike the ARM-powered Surface RT, the Surface Pro will pack more traditional hardware and it'll be capable of running existing Windows programs in addition to new ones designed for Windows 8. (Due to its architecture, the Surface RT can only run Windows 8 apps and not legacy programs.)
With two tablets on the market, Microsoft would be wise to discount its entry-level Surface RT tablet, so at the very least we recommend holding off till the Pro's debut before making any purchasing decisions. If you still can't wait till March for the first deals, then shoppers should wait until the Surface RT has better distribution. In other words, wait until you can walk into a Best Buy and see it in person, as third party retailers are more likely to discount the tablet (or bundle it with a gift card) than Microsoft.