Is Microsoft's Surface set to take a dive?

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Microsoft (NASDAQ: MSFT) is getting ready to release its new Surface tablet next week, but concerns have already been expressed about competing products, pricing and licensing issues that could torpedo the launch.

First, Microsoft's Surface is plunging into the tablet market with new, low priced offerings from Amazon (NASDAQ: AMZN) and Google (NASDAQ: GOOG), as well as Apple's (NASDAQ: AAPL) planned launch of the iPad Mini, which is expected to be cheaper than the granddaddy of all tablets, the iPad.

Microsoft faces a pricing dilemma, noted ThinkEquity analyst Yun Kim. If it prices the Surface too high, this could lower sales, but if prices it too low, this could hurt revenue, Kim wrote in a report quoted by eWeek.

Microsoft briefly posted the pricing of the Surface tablet running Windows RT, ranging from $499 to $699, on its online store on Tuesday, but then pulled the prices, according to a report by Computerworld. Microsoft declined to explain why the prices were taken off the online store. This range would put the Surface tablet in the same pricing ballpark as the iPad, the most expensive tablet option out there.

In addition, Microsoft has created a potential licensing mess surrounding the Surface tablet. In an effort to encourage corporate adoption, Microsoft will not apply additional licensing charges to Surface tablets, charges that it does apply to companies when their employees access Microsoft applications from iPads and Android tablets, according to a report in the Wall Street Journal.

A company is responsible for Microsoft licensing charges, even when employees configure their iPad and Android tablets to access work email without the company's permission. If the corporate email is hosted on a Microsoft Exchange email server, this action triggers a requirement for a client access license. Since Exchange runs only on the Windows Server, the company needs a Windows Server license, according to the report.

"A coming nightmare scenario for many organizations will be the day that Microsoft asks them how many of their employees access email or work documents from their smartphones or iPads," the Journal quoted Paul DeGroot, a senior consultant with Software Licensing Advisors, as saying. "Any company that responds 'we don't know' has just set itself up for a giant compliance penalty," he explained.

Even with these potential enterprise problems, close to half of 100 IT managers surveyed by ThinkEquity plan to standardize their mobile platforms on devices running Windows operating systems. This was up from 44 percent from the previous quarter.

Only 8 percent of respondents said they would standardize on Google's Android, down from 11 percent in the previous survey. 14 percent said they would standardize on Apple's iOS, up from 10 percent in the previous survey.

Microsoft is counting on its dominance of the corporate IT environment to get back into the BYOD game. While Apple gained the early lead, Microsoft is looking to leverage its corporate power to muscle its way into the enterprise tablet market.

For more:
- read the WSJ report
- check out the eWeek article

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