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How Does the iPad Mini Change the Surface RT Launch?

Apple pulled one of the oldest tricks in the IT marketing book this week. When your competitor is about to make a highly anticipated, long-planned announcement, muddy the waters with a major announcement of your own earlier in the same week. As Microsoft was finalizing its PowerPoint decks and teleprompter scripts for the Windows 8/Surface launch events on Thursday, Apple snuck in with the launch of the iPad mini -- a 7.9-inch, 0.68-pound, $329 tablet.

The announcement doesn't blow up Microsoft's event before it happens, but it does add some twists to challenges Microsoft already faced.

Price: With a $329 starting price for the iPad mini, Apple moves the baseline on the iPad-vs.-Surface price conversation down by about $70. When Microsoft announced its Surface pricing last week, it was already even with the base third-generation iPad at $499. But there were two caveats. One is that the key feature of the Surface is laptop-like productivity and to really unlock that requires the Type Cover. With a Type Cover, the Surface starts at $599. The other caveat is that the perfectly serviceable iPad 2 could be had for $399. Now, with the mini, the lowest-end iPad is $170 cheaper than the lowest-end Surface. Investors didn't like the price because it doesn't help Apple too much with low-end tablet competitors. But for Microsoft, trying to go shoulder-to-shoulder with Apple, the price hurts. Effect of the mini launch: Bombshell

Apps: It was already clear that Windows RT devices were going to have a steep hill to climb with apps. Given that Windows RT can't run standard Windows applications, and can only run apps that are either pre-loaded (even if they're great apps like Word 2013, Excel 2013 and PowerPoint 2013) or available through the fledgling Windows Store, there was never any doubt that there would be fewer Windows RT apps than Apple iPad apps. By launching the iPad mini, which can run every iPad app, Apple got a large megaphone to shout to the world that there are 275,000 iPad-specific apps and about 700,000 apps that can run on the iPad when you count all the iPhone apps that can also run on the device. Microsoft, with apps numbering in the 3,500-10,000 range for the Windows RT launch, doesn't want people thinking about that comparison right now. Effect of the mini launch: High

Cellular: Apple had the cellular connectivity option with the iPad. Microsoft won't offer it on the Surface. The iPad mini will have it. This is another unwelcome reminder of a limitation of the Surface. To the extent that price is an important consideration in the tablet wars, this is far less of a consideration, as cellular adds substantially to the cost and is chosen by relatively few buyers. Effect of the mini launch: Low

Screen resolution: With the iPad mini, Apple chose not to include its Retina display. This is actually a win for Microsoft because it makes for a less clear story on iPad device resolution versus Surface. By the numbers, the iPad with Retina display is 2048x1536. The iPad mini, like the iPad 2, is 1024x768. The Surface is 1366x768. Effect of the mini launch: None

Look and Feel: The iPad mini is tremendously light and small without being uselessly tiny -- it should change the dynamics of the smaller tablet market. But Microsoft's Surface tablet is so different from any other tablets out there that it should be largely unaffected by the advances made by the mini. The kickstand and the Touch Cover guarantee that the new device won't be crowded out visually by a miniaturized version of a tablet the world is already very familiar with. Effect of the mini launch: Small

Stealing Microsoft's Thunder: Clearly, Apple is trying to raise the maximum amount of attention for the mini, with a side benefit of undercutting Microsoft's announcement. So Apple's launch will be judged by iPad mini sales, not by its effect on a competitor that is struggling mightily to stay relevant. But from Microsoft's view, how much does the iPad mini hurt the Surface launch?

In the consumer market, the answer is quite a bit. Windows RT was always going to have challenges making inroads with consumers. Whatever factors went into Microsoft's pricing on the Surface RT, the decision to put the low end at $499 (without the keyboard) severely limited its prospects as an impulse purchase. Apple's iPad mini pricing makes it even harder for the first Surface RT to become a mainstream consumer device.

In the higher-end consumer market, people looking to replace PCs for students or home business use, the iPad mini isn't an option and the pricing is less of an issue. So, Microsoft probably didn't lose much there. In the corporate market, neither the iPad mini nor the Surface RT seems to have much to offer. Companies interested in a Surface device would be holding out for the Surface Pro in January. All told, Apple's pre-launch launch will probably freeze a few mid-range consumer buyers who might have considered a Surface but will note Apple's reminder of how much they're giving up in the way of apps.

Total effect of the mini launch: Medium.

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Posted by Scott Bekker on October 24, 2012 at 11:58 AM


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