Monday, October 22, 2012

Why Surface May Undermine OEMs ...

… Microsoft.

From Charlie Kindel (the other "kindle") – Why Surface is Not a Microsoft Business:

It turns out the Surface with a cover is $599. Without, it’s $499. I had done my back-of-the-envelope math assuming it did not include a cover. Thus I was very, very wrong when I said Microsoft will “earn a respectable 20% margin”.

The $499 price means Microsoft will not make any real margin on the Surface.

They may make some profits on the cover, assuming the cover isn’t ridiculously expensive to make (it might be). But even then there is no way the amount Microsoft will make will come close to the $85 they are reportedly charging OEMs for Windows RT licenses.

Worse, every Surface that sells is one less non-Surface Windows RT unit that sells meaning Microsoft not only doesn’t get the $85 from the Surface sale (they’ve priced it so close to wholesale there’s no margin in it) they won’t get $85 from the OEM.

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