If you buy a Microsoft Surface, it probably won't be because of the price

Earlier today, Microsoft announced the prices for its Surface for Windows RT tablets. The entry-level Surface for Windows RT tablet comes with 32GB of storage and sells for $499 (U.S.); the same model with a black Touch Cover keyboard sells for $599. The 64GB model bundled with a black Touch Cover sells for $699. If your tastes run to a more colorful Touch Cover, those are available separately for $119; if you prefer a more conventional keyboard design, the Type Cover is also available in black only, for $129.

Several months ago, there were some rumors that Microsoft would try to underprice Apple with an entry-level Surface tablet priced as low as $199; those rumors were disproved today. Microsoft has taken pains to point out that it's pricing its 32GB model where Apple prices the 16GB third-generation iPad, and the 64GB bundle is priced the same as Apple's 32GB model without a keyboard. Microsoft's prices are very competitive, but Windows RT will only have a tiny fraction of the apps available for iOS or Android when it and the Surface tablets are released next week.

Microsoft seems to be at a loss to describe exactly what the Surface is--according to Windows business unit president Steve Sinofsky, it's neither a tablet nor a notebook computer. Microsoft's new television ads don't help--they show people dancing around with Surface tablets as they connect and disconnect keyboards, but they don't actually show anyone doing anything useful with the devices. That's the trap that tablets like the Motorola Xoom and BlackBerry Playbook fell into--Motorola and RIM showed their tablets playing videos and games, but not doing anything useful.

There's not going to be a lot that consumers will be able to do with Surface tablets when they first ship, at least in comparison to iPads and Android tablets. It will take time for developers to build up a competitive catalog of apps, and developers won't bother until they see Windows RT gaining market momentum. By themselves, Microsoft's prices will do little to stimulate sales.

In addition, I believe that we're going into the Christmas of 7" tablets: Apple said that it plans to make an announcement, most likely of a 7" iPad (among other products,) on October 23rd. The focus this holiday season will be on tablets selling for $199 to $299, not $500 or up. Consumers will be comparing the small iPad to the big iPad, or the small iPad to Amazon's Kindle Fire HD, Barnes & Noble's Nook HD and Google's Nexus 7. They're unlikely to be comparing anything to the Surface for Windows RT.

Microsoft may believe that Android, on tablets at least, is highly vulnerable to being displaced. Under this scenario, Microsoft's goal would be to make Windows RT the credible alternative to iOS, and then wait for Apple to make a serious mistake, just as the Xbox 360 capitalized on Sony's mistakes with the PlayStation 3 to become the video game console market leader. (It's the "I don't have to outrun the bear, I only have to outrun you" idea.) If that's Microsoft's approach, all they have to do is beat Android, not take away a significant number of iPad sales. If Microsoft fails, however, people will be comparing the Surface not to the Xbox, but rather, to the Zune.

HP to focus on Intel-based Windows 8 tablets, skip ARM-based Windows RT tablets

Bloomberg reports that HP has decided to focus on building Intel-based Windows 8 tablets and not release an ARM-based tablet running Windows RT. HP was one of the vendors given early access to the Windows RT platform by Microsoft. As fewer manufacturers commit to Windows RT, more pressure is being put on Microsoft's Surface tablet to be successful. If Microsoft ends up being the only company with a first-tier Windows RT tablet, it will make any chance of successfully competing against Apple almost impossible.

Promethean introduces its table-sized tablet just as Microsoft distances itself from its version

MindShift reports that Promethean has just introduced a table with an integrated 46" touchscreen LCD for classroom use called the ActivTable. Up to six students can interact with the device at the same time, and Promethean offers a collection of "activities" designed for four- to 11-year-old children. The ActivTable will sell for $8,000; adding the entire suite of interactive tools can cost as much as $4,000 more.

Promethean's timing is a little off: Microsoft launched a table computer called Surface (yes, that's where the company got the name for its new tablets) in 2008. Samsung took over production of a second-generation version of the device this year, and the same day that Microsoft announced its Surface tablets, it quietly renamed the table computer to PixelSense. The original Surface computer has found a few customers, but by and large, it (and Samsung's version) have been seen as overpriced toys. (Samsung's SUR40 is priced at $8,400.)

If Microsoft's table/computer had ever gotten much market traction, it wouldn't have been possible for the company to adopt its Surface brand name for its new tablets without causing a great deal of market confusion. Given Microsoft's experience, and at its $8,000 price, Promethean's ActivTable is going to have a steep uphill battle for sales.

DigiTimes reports Microsoft is outsourcing Surface tablets to Pegatron; expected prices above US$599

DigiTimes reports that its sources say that Pegatron, which is one of Apple's iPad manufacturers, has won the contract to manufacture Microsoft's Surface tablets. These sources also estimate that the price of the Surface for Windows RT, which will compete directly with the iPad, will be priced above $599, while the Intel-based Surface for Windows 8 Pro will be priced above $799. In both cases, the high prices may outweigh the appeal of the tablets' industrial design. In addition, Microsoft has said that the tablets will only be sold in its retail stores (of which there are 21, plus four more under construction,) and online. Without other retail outlets, it's highly unlikely that Microsoft can get the volume it needs to drop the tablets' prices enough to be competitive with Apple and other manufacturers.