CNET has written a story that the iPad mini is stealing sales away from the iPad 4, according to an investors note from Citi. The Citi analyst appears to warn and be worrisome that iPad 4 is suffering at the expense of iPad mini.
Perhaps it’s lost in translation but, I bet Apple couldn’t be happier that the mini is stealing sales from the iPad 4. Perhaps this is also something financial folk – since it seems they only worry about stock value – cannot grasp. Would Apple rather see iPad 4 sales being cannibalized by, say Surface RT, Kindle HD, or some other tablet? The entire goal of product innovation is to out-innovate yourself before your competition does it for you. If iPad mini is the primary tablet stealing sales from iPad 4, then Apple has done its job right.
On the Surface of It
Coincidently, Microsoft recently announced pricing for its upcoming Surface Pro – their advanced “quasi-tablet-PC” answer to the iPad and other tablets. The less expensive RT version has been on sale now for a bit. The Pro version is expected to become available in January 2013. The problem right away is it is priced to high, even more than the most expensive iPad. This creates several high-level perception problems.
Some might argue it is more powerful – it’s practically a desktop in a tablet. Well, that’s also the problem. The perception one creates from the pricing matters. Apple charges a premium for their stuff because people buy into getting a good design that looks better than most PC designs. The problem with Surface is that it doesn’t properly establish this same position. Microsoft has years of “white-box” history saddling this perception. Sure, I believe Surface delivers some genuine innovation. The keyboard idea is slick, as is the stand. But, it still comes across as a basic tablet. Now, you want to charge $899 and $999 for a Pro version??? The instant thought of most PC users will almost certainly be to compare the pricing to ultrabooks – even desktops – that are priced similarly.
While Surface is not an ultrabook or a desktop, well, it’s not an ultrabook or a desktop. What I mean by this is that pricing it so close to other devices that can deliver more bang was a mistake. People will compare it to these devices, even if they are not one and the same, because the price warrants this comparison. I’m not sure of the profit margin Microsoft is expecting from Surface Pro but, the company would help itself if they had eaten some or all of the profits early on to drop the price. In my humble opinion, the pricing shouldn’t have exceeded $699 as a starting price – $799 max with any keyboard. $100+ matters that much here.
This would have positioned the Surface Pro as a lower-cost direct competitor with iPad without drawing constant comparisons to ultrabook and desktop pricing. Microsoft would then have a less expensive option to offer the enterprise that still delivers more powerful capabilities. This value proposition is how Microsoft had maintained its dominance in the enterprise. Pushing a new quasi-tablet-PC that is more expensive than the tablet that has the biggest lead in the enterprise is a big risk.
It doesn’t appear Surface Pro will be cannibalizing Surface RT sales like the mini is doing the iPad 4. This is a step backward.