Microsoft to price new tablet same as iPad

In this June 18, 2012, file photo, Microsoft Corp.’s new Surface tablet computer is displayed at Hollywood’s Milk Studios in Los Angeles. AP /DAMIAN DOVARGANES

SAN FRANCISCO—Microsoft said on Tuesday its new Surface tablet computer – designed to challenge Apple’s iPad – will be sold at roughly the same price as the market leader.

Microsoft began taking pre-orders for the Surface, which will start at $499 (382 euros) for US customers for a tablet with 32 gigabytes of memory. A 64GB version bundled with a black touch cover is priced at $699.

The prices are in line with the iPad, which begins at $499 but with less memory. Apple is expected to unveil a low-priced “iPad Mini” next week.

Surface will be available October 26 at Microsoft Store locations in the United States and Canada and will be sold online in eight markets: Australia, Canada, China, France, Germany, Hong Kong, Britain and the United States.

Microsoft chief executive Steve Ballmer has described the iPad challenger – complete with a built-in stand and ultra-thin covers which double as keyboards in a range of colors – as a tablet that “works and plays.”

The tablet will run on the Windows 8 operating system, which is also being released October 26.

Analysts said Microsoft was walking a fine line in not pricing the Surface too low, which could upset its partners, or too high, to discourage buyers.

At that price level, Citi analyst Walter Pritchard said, “We are not sure there is sufficient motivation to lure consumers away from the iPad.”

“We believe by pricing Surface in line with iPad, Microsoft may be indicating that it feels good about the product and that the addition of Office more than justifies the price parity,” the analyst added.

Morgan Stanley’s Adam Holt called Surface “a compelling value” because it includes the Office software suite, which includes the widely used word-processor Word, which may be key for business users.

He said Morgan Stanley’s own survey found “61 percent of potential tablet users saw the ability to use Office as among the most important features to consider when purchasing a tablet, and should work to Microsoft’s benefit.”

But Raimo Lenschow at Barclays said the Windows 8 Pro version with an Intel chip will come out next year and probably be more expensive.

“The Windows 8 Pro version of Surface is the model we could envision having traction within enterprises,” he said.