Microsoft to build more than 3 million Surface tablets, says IDC

Microsoft is expected to build a little more than 3 million Surface tablets, market researcher IDC told CNET. An IDC analyst also offered his views on the likelihood of a $199 version of the tablet.

Production plans are for a few million units for calendar 2012, said IDC analyst Bob O’Donnell in a phone interview. “Probably a little over 3 million, both [Intel] x86 and ARM,” he said. Surface RT is built around ARM processors and will not support older “legacy” software that runs onWindows 7. Intel-based Surface will run Windows 8 Pro that does run legacy software.

“If they build a few million units there’s no way they can sell it through Microsoft store only,” he said, referring to Microsoft’s current plan. “So I think that they’ll sell it through traditional retail also. You can’t build that many products without having a much wider distribution strategy. They just haven’t shared that [strategy] yet,” he said.

O’Donnell also had a lot to say about the possibility of an inexpensive Surface RT device, which a report claims may debut at $199.

“There could be two ways to get Surface. Buy it outright for, let’s say, $599. Or $199 for a two-year subscription and you can get X,Y, and Z — which, oh, by the way, works out to more than $599,” he said.

The subscription theory was explained recently in a blog by a former Microsoft manager Hal Berenson, who says, “it is completely within expectations, and in fact the $99Xbox deal is just telegraphing it for all who are willing to listen, that Microsoft is going to offer the Surface for $199 when you sign up for a TBD (to be determined) subscription of some sort,” he wrote.

And he originally floated this idea in a June 13 post here.

But O’Donnell has serious doubts about a $199 Surface. Even a subscription-based Surface wouldn’t work because he doesn’t think that pricing model would be successful on a PC product, which Surface essentially is.

“MS Office subscription? Any Windows RT product comes with Office. So, that knocks out that theory,” he said. Indeed, Microsoft states this clearly in a blog post.

“They do have a video store and music store. Theoretically they could give you a Netflix type or Pandora type deal with free access to music and video. But remember what happened to Netbooks and 3G, where you had to pay a monthly fee? That was a disaster. It took off initially but then nosedived. The point is, people catch on and say wait and minute, when I do the math on this monthly thing I’m paying way more than I want to.”

And the other theory that Microsoft really wants to sell the software, not the hardware, thus the discount. “Let’s say there are four competitors. In a fair world the price is about the same and they each sell 25 percent. But at $199 Microsoft sells 100 percent and everyone else sells almost zero. They (Microsoft) have a truly symbiotic relationship with [PC makers]. If you undercut their prices then all of those licenses you would have sold through [PC makers] don’t get sold,” he said.

Microsoft declined to comment for this story.

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