Microsoft Surface RT, Surface Pro: Do Price Cuts, Channel Program Go Far Enough?

Back in February, Microsoft (MSFT) rolled out its Surface Pro tablet at a competitive price point of $600, coming close to the low-end iPad price and beating Apple’s tablet on a huge feature for business – the ability to natively run Microsoft Office apps like PowerPoint, Excel, Word and Outlook. What’s more, Microsoft beefed up its go-to-market strategy by letting all of its reseller partners sell and deploy the devices with a new device partner program. While the tablets might not have been a huge profit center for Microsoft, their massive market uptake has marked a new beginning for Windows in the market and solidified the strength of Office. 

Right, this is not what happened at all. Instead, Microsoft introduced Surface Pro in February for $899, not including the optional keyboard, well above the price Apple charged for its iPad. (I’ve seen estimates on the Bill of Materials and manufacturing costs in the sub-$500 range, although iHS / formerly iSuppli, has not done a teardown of Surface Pro.  iHS placed the Surface RT BOM at $271. The device was initially priced at $499 when released in last fall.) And then Microsoft restricted the distribution channel for Surface Pro to Microsoft retail stores, Microsoft’s online store, and other retail stores, much like it was for RT.

Earlier this month at Microsoft’s Worldwide Partner Conference in Houston when partners questioned the lack of a channel strategy for Surface, Microsoft’s COO Kevin Turner told them that they should bring their customers to the Microsoft Retail store, if the customers wanted to see the Surface devices in action. Here’s what he told partners, according to a Business Insider report: “”You should feel free to use our store as an extension to your office. Bring your customers there.”

To be fair, Microsoft also introduced a reseller program for Surface at WPC, but only for a handful of really big partners such as CDW. The rest can, you know, bring customers to the Microsoft store.

Last week in its earnings release Microsoft announced a $900 million charge to related to Surface RT after reducing the price by $150 to $349.

“We believe this pricing adjustment will accelerate Surface RT adoption and position us better for long term success,” CFO Amy Hood told analysts during an earnings call, as reported by Seeking Alpha (a statement which perhaps acknowledges that the initial price point was too high). She also mentioned the expanded distribution channels.

Would Surface have had a better chance of initial success if channel partners had carried the devices into customer offices and put them into CIOs’ hands? Would more competitive pricing have given it an edge? These were two of the issues we had with Microsoft’s strategy back when the devices were initially released.

The question today is, do the price cuts and the limited channel distribution go far enough? I certainly have an opinion on that, and you can probably guess what it is. But I’d love to see yours in the comments below.