Rumor: Windows RT Surface could cost $199

Interesting. When it unveiled its Surface tablet in June, Microsoft said the Windows RT version of the device would be priced competitively with "comparable" ARM devices. Whispers from the Far East suggested the tablet could end up costing more than $599.

Now, the guys at Engadget say they've got word from an "inside source" that the Surface for Windows RT will actually be priced at $199. Yes, $199, just like the 7-inch Nexus 7 and the Kindle Fire. The information purportedly leaked out of a "session" at the TechReady15 conference where "all the launch details were laid out."

Now, the Surface is the farthest thing from the Nexus 7 and Kindle Fire. It's supposed to have a larger, 10-inch display, 32GB of flash storage capacity, and a pre-installed version of Office 2013 Home & Student. Microsoft has touted the device's "VaporMg" chassis, as well, which it describes as a "combination of material selection and process to mold metal and deposit particles that creates a finish akin to a luxury watch."

According to an IHS teardown report posted last month, Google's 16GB Nexus 7 tablet costs $159.25 in parts. IHS expects that, "when additional costs are considered," Google "at least" breaks even on the device. A similar teardown of Apple's iPads in March revealed a total production cost of $316.05 for the $499 new iPad and $245.10 for the $399 iPad 2. It's probably fair to expect the Surface will cost at least as much as the iPad 2 to manufacture, which would suggest that, if Engadget's source is correct, Microsoft could end up selling the device at a loss.

Perhaps taking a hit on each Surface tablet isn't an unwise strategy to spur Windows 8 and Windows RT adoption. When HP canned webOS and unloaded its TouchPad tablets at $99 a pop last summer, everyone rushed to pick one up despite the platform's murky future. By November, NPD Group reported that the device had the second-largest market share in the U.S., just behind the iPad.

At the same time, such a strategy could alienate Microsoft's hardware partners. Acer chairman JT Wang told DigiTimes last Friday that he hopes Microsoft will reconsider its plan to offer the Surface in the first place. Wang also said Microsoft was "looking for solutions such as creating a price gap to minimize the negative impact on other vendors' product lineups." He noted that a $199 price tag would have a "rather significant impact," while a figure in the $499-599 range would be less harmful to other partners' efforts.

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