A $400 Surface Tablet? God, Yes (Premium)

Almost exactly two years ago, Microsoft announced that it would no longer manufacture an entry-level Surface PC. And in the wake of that announcement, it expanded its Surface lineup with new premium devices that pushed prices ever-upward. So why would Microsoft be backtracking here in 2018 and planning a new run at the low-end of the market?

There are two major reasons, I think.

First, Google and Apple are both making aggressive pushes in the price-sensitive education market, with devices that often sell for well under $400. And given the importance of the education market---the audience literally represents the future---Microsoft can't leave this one up to its PC market partners.

Second, Microsoft has found great success in various vertical markets, both with Surface specifically and elsewhere. And a low-cost Surface tablet could be interesting in a number of scenarios, including with so-called firstline workers, in factories, in retail, and so on. Many of those people will be standing and couldn't even use a keyboard.

Put simply, a $400 Surface tablet isn't just a good idea. It's necessary.

It's also something that is completely misunderstood in some quarters, given the conversation that's occurred in the wake of this week's news.

The biggest misunderstanding is that the $400 price isn't "real," that any Surface tablet owner would also need a keyboard cover and maybe a Surface Pen.

That's only partially true. Yes, in traditional education scenarios, a Surface tablet that could compete with a clamshell Chromebook laptop would need a hardware keyboard. But the original Bloomberg report that triggered this debate notes that the keyboard cover and pen that Microsoft is planning for this new tablet would be less expensive than today's Surface Pro peripherals. Even a ~$500 Surface tablet (with keyboard) would be somewhat reasonable. After all, the cheapest Surface Pro today sells for $800 sans keyboard cover.

But Microsoft is also competing with Apple and the iPad, both in education and in vertical markets. With Apple now selling its $329 entry-level iPad for just $299 in education, Microsoft needs to close that gap, too. And while a $400 to $500 Surface tablet is absolutely more expensive than that iPad, it's also a real computer. The iPad is a toy by comparison.

Finally, here's an inconvenient truth: Microsoft's premium PC strategy simply hasn't worked. The software giant has not established itself as a credible mass-market PC maker, and that's before you even consider its (now out-of-date, I believe) reliability problems. New Surface PCs like Surface Book and Surface Laptop have sold poorly, much more poorly than Microsoft had expected. And the entire product line collectively has very low single-digit market share. This just isn't a big business for Microsoft.

Some volume could help. So could a more reasonable pricing spread, where more expensive Surface PCs could be positioned as aspirational rather than bein...