Surface Pro 3: Let's Talk About the Price

While my initial impressions of Surface Pro 3 are overwhelmingly positive, at some point we need to address the less-than-ideal aspects of this new device. Key among them, I think, is the price: Surface Pro 3 is positioned as a premium transforming Ultrabook and as such it is out of reach, financially, for many. So let's step through that and discuss why Microsoft is targeting only the high-end of the market, and which of the Surface Pro 3 models—if any—represent the best value.

At the start of the Surface Pro 3 event on Tuesday, Microsoft CEO Satya Nadella said something almost in passing that represents a major strategy change for Surface.

"We're not interested in competing with our OEMs (PC maker partners) when it comes to hardware," he said. "In fact, our goal is to create new categories and spark new demand for our entire ecosystem."

So that's one consideration for positioning Surface Pro 3 at the high-end of the market: Most of the PC market happens around much lower price points, with the average selling price of a PC being somewhere in the $300 to $400 range. (I haven't seen recent data.) Once you hit $1000, the options decrease dramatically. As do the sales. So by positioning Surface at the high end of the market, Microsoft is both avoiding direct competition with its partners and, hopefully, jumpstarting a market for higher-end, more expensive PCs.

Obviously, there are some great choices in the $1000+ PC market already, including the Lenovo ThinkPad X1 Carbon and Lenovo Yoga Pro 2 I recently reviewed. But Surface Pro 3 also differentiates from these types of devices—and arguably creates a new categories—by being a device that can be used as both a tablet and a laptop. That is, it's not a tablet first, laptop second (like Surface RT) or a laptop first, tablet second (like Surface Pro 2). It can be both. You won't hear the phrase "no compromises" around Redmond these days for obvious reasons. But there it is.

As a bigger and technically more impressive rendition of the previous Surface Pro models, it is understandable, in a way, that the Surface Pro 3 is on the expensive side. But how expensive?

Here's the product line price breakdown:

Surface Pro 3 - Intel Core i3, 64 GB and 4 GB of RAM - $799
Surface Pro 3 - Intel Core i5, 128 GB and 4 GB of RAM - $999
Surface Pro 3 - Intel Core i5, 256 GB and 8 GB of RAM - $1,299
Surface Pro 3 - Intel Core i7, 256 GB and 8 GB of RAM - $1,549
Surface Pro 3 - Intel Core i7, 512 GB and 8 GB of RAM - $1,949

That's a pretty broad price range. But it's also not complete. Even more so than with the Surface Pro 2, I think it's reasonable to expect every single Surface Pro 3 customer to also purchase a Type Cover, which adds another $129 to the price. So the real prices of these devices work out like so:

Surface Pro 3 - Intel Core i3, 64 GB and 4 GB of RAM - $928
Surface Pro 3 - Intel Core i5, 128 GB and 4 GB of RAM - $1,128
Surface Pro 3 - Intel Core i5, 256 GB and 8 GB of RAM - $1,428
Surface Pro 3 - Intel Core i7, 256 GB and 8 GB of RAM - $1,678
Surface Pro 3 - Intel Core i7, 512 GB and 8 GB of RAM - $2,078

Are these good prices? As always, we head to the Apple Store to find out. A 13-inch MacBook Pro with Retina Display that includes an i5 processor, 128 GB of storage and 4 GB of RAM is $1299, about $171 more than the equivalent Surface Pro 3, and it lacks multi-touch or electromagnetic pen capabilities, weighs more, and is less versatile. A version with 256 GB of storage and 8 GB of RAM is $1499, about $72 more than the equivalent Surface Pro 3, with the same limitations.

You get the idea: In this stellar, high end of the market, Surface Pro 3 is actually pretty reasonable from a price perspective, especially when you consider its many advantages over the most vaunted of its competition.

But that won't help you if you can't afford such a device.

The cheapest Surface Pro 3, realistically, is under $1000, at $928, but the one I'd recommend for most users—the version with an Intel Core i5, 128 GB and 4 GB of RAM—is $1128, about par for the course in the high-end Ultrabook market, but ... yes, it's expensive. But if the Surface Pro 3 lives up to my expectations—is, in fact, a great Ultrabook and at least a decent tablet—then this in fact a good value for that price. It is reasonably priced compared to the competition.

So what's the average consumer to do? Obviously, Surface Pro 3 isn't for you. But then neither is the MacBook Pro Retina, ThinkPad X1 Carbon, Yoga 2 Pro, or other similarly priced devices. I'm currently looking at some much cheaper—in every sense of the word—devices like the Lenovo Yoga 2 (non-Pro) and Dell Venue 11 Pro. They can't match the performance or elegance of Surface Pro 3, but they do in their own way offer similar versatility. Best of all, they are much less expensive.

Are these or other sub-$1000 offerings viable alternatives? Sure. But that's like asking if a Chevy Cruze is a viable alternative to a BMW 428i. Either one will get you there. But the more expensive choice has a sense of élan and quality that is missing from the lower-end choice.

My expectation is that most Surface Pro 3 sales will be to corporations—which will get volume discounts and will further save money by replacing two devices (tablet and laptop) with this single device—and to well-heeled "pro" users who, like BMW owners, perceive and appreciate the value of the luxury offering. There's nothing wrong with Microsoft providing such a choice, though you have to think the addition of an inexpensive Surface mini—delayed yet again, this time at the last minute—would have helped soften the blow.