Microsoft Earning PC Revenues from Surface Tablet

Microsoft has been the kingpin of the PC market for two decades. From the early 90s, Gates and Co have dominated the market, flooding both home and enterprise usage. However, the turn of the millennium saw the rise of new gadgets which threatened to take away the demand for PCs. The laptop was the first catalyst towards this and smartphones, modern cellphones and tablets keep adding to the lot. Hence, it is natural for Microsoft to have doubts about its success when the world finally enters a post-PC phase.

Even now, most people have reverted to mobile and portable devices instead of using a PC. Even the laptop is now being displaced with handheld devices as the users get the same features, software and programs on that. Internet connectivity has come a long way over the years and people don’t have to compromise on browsing or downloading speed to use internet on the new gadgets. Microsoft finally jumped on the bandwagon and released its own tablet: Surface.

However, the company hasn’t been successful by fluke. In fact, they have found a way to capitalize on growing user demand for tablets in today’s market. From the outset, it would seem as though Microsoft wouldn’t have much of a chance of gaining a substantial market share in the face of immense competition from Apple and Samsung. What they have done is priced Surface in a way that enables the company to earn PC revenues.

It may sound confusing to the average Joe but Microsoft has proven that it is shrewd once again. Though there has been no official word on the matter, an analysis carried out by a market expert showed that the tech giant has been up to its tricks again. According to the report, Microsoft has priced the Surface so that the license fees it is charging are at the same level as they did for their PCs. This is the reason why Surface is priced at $499.

The main problem faced by Microsoft when developing the tablet was the cost of the Office suite. The Microsoft Office is a major feature of Windows and people around the world use it regularly. However, it costs close to $70 and including it on the Surface tablet drives the costs up. In addition, the Windows OS costs around $50 which added to the cost of making the tablet ($200) means Microsoft spends over $300 on making one Surface tablet.

What this means is that they are earning a profit of over $150 per unit sold taking into account the costs of marketing and distribution. This is similar to how Apple prices its products. More importantly, it is close to the $120 Microsoft earns for each PC it sells. Still, it remains to be seen whether Surface is as successful as the iPad or fizzes out in the near future. Some analysts have suggested that Microsoft should sell the tablet itself to cut down costs further and increase the profitability.

Regardless of whether Surface is successful or not, the move by Microsoft to try to pull in PC revenues from a tablet show that it is preparing for a post-PC world.

[Image via geek.com]