Last week, Microsoft announced that it would take a $900 million write-off on its Surface RT tablets. Although launched with high hopes in the fall of 2012, the sleek devices—which run Windows RT, a version of Windows 8 designed for hardware powered by the mobile-friendly ARM architecture—have suffered from middling sales and fading buzz.
Now Microsoft has a scary decision to make: double down on its Surface RT promotional efforts, hoping that sales will eventually pick up, or scrub the whole project.
Scrubbing the whole project wouldn’t be the worst outcome. For starters, it would ease the minds of third-party manufacturers worried about Microsoft’s attempts to remake itself as a full-fledged “devices and services” company. Many of those manufacturers have been exploring alternatives for their hardware, such as Google’s Chrome OS and Android, and Microsoft easing back on its own hardware aspirations might convince them to more wholeheartedly embrace the Windows ecosystem.
Abandoning Surface would also spare Microsoft from sinking more cash into an endeavor that’s attracted middling interest from consumers. With every passing quarter of anemic sales, the Surface will just appear sadder and sadder.
But if Microsoft decides to continue with Surface, there’s one surefire way to restart its (metaphorical) heart: make it the ultimate bargain. The company’s already halfway there, having knocked $150 off the sticker price, but that’s not enough. Imagine Microsoft pricing the Surface at a mere pittance, say $50 or $75—even in this era of cheaper tablets, the devices would fly off the shelves so fast, the sales rate would make the iPad look like the Zune.
There’s a historical precedent for such a maneuver. In 2011, Hewlett-Packard decided to terminate its TouchPad tablet after a few weeks of poor sales. In a bid to clear its inventory, the company dropped the TouchPad’s starting price to $99, which sent people rushing into stores in a way they hadn’t when the device was priced at $499. Demand for the suddenly ultra-cheap tablet reached the point that HP needed weeks to fulfill backorders. (Despite that sales spike, HP decided to kill the TouchPad; the margins on $99 obviously didn’t work out to everyone’s satisfaction.)
In the wake of Microsoft announcing that it would take that $900 million write-down on Surface RT, reports surfaced that the company could have as many as six million units sitting around, gathering dust. Whether that figure is accurate—it seems more based on back-of-napkin calculations than anything else—it’s almost certainly the case that Microsoft has a lot of unsold Surface RTs in a bunch of warehouses all around the world. Why not clear them out by knocking a couple hundred dollars off the price? It’s not as if they’re going anywhere, anyway.
If Microsoft truly wanted to get crazy—not exactly something in its corporate DNA, but let’s spitball a moment here—it could slash the Surface RT price to $50, undercutting even Amazon’s Kindle Fire and Google’s Nexus 7. And if that maneuver sparked a TouchPad-style sales frenzy, millions of Windows tablets would be in the ecosystem, creating a virtuous cycle that would draw everyone from third-party app developers to game studios to businesses.
Would Microsoft do something so radical? Probably not: this is a company that likes to play conservative and make a profit, after all. But maybe playing crazy is something it should consider if it wants to make a dent in the mobile-device market.