One of the questions that's been kicked around since Microsoft debuted Surface last summer is how much Redmond would charge for the systems. Rumors have ranged from the ridiculously low ($299) to $1200 or more. Microsoft briefly posted prices on its own store, and while the numbers and listings have been pulled, the price targets were extremely reasonable. They've also been confirmed by a handful of journalists who attended a Microsoft early briefing.
The tablet version of Surface will debut at $499 for a 32GB tablet running Windows RT (that's the second-class ARM flavor). The Touch Cover keyboard Microsoft invented for the system will go for $599; with a premium 64GB configuration for $699. Covers will also be sold separately for those who choose to try out the tablet design and then upgrade; the Touch Cover will go for $119.99, while the "Travel Cover" (a cover with notebook-style key traveling) will go for $129.99. We generally think that treating docks and keyboards like $100 upgrades is a bad way to encourage tablet adoption, but Microsoft is clearly betting that novelty will drive Smart Cover uptake. Whether or not that's true will depend substantially on the characteristics and typing capability of the covers themselves.
While we don't have prices on the x86 versions yet, these targets suggest that Microsoft wants to position itself squarely against the iPad. Whether more storage at the $499 price point will be enough to do that is an open question; $399 for the base tablet and a $499 Surface + keyboard would've given customers a visceral, concrete advantage to lock on to when comparing against Apple's devices. Still, we don't blame Microsoft for thinking big -- it's much easier to cut prices than to raise them, and the company is clearly tired of playing underdog in the tablet/smartphone business, where low handset prices haven't done much to stimulate Windows Phone 7 demand.
At this point, we expect the x86 versions to carry a $100-$200 price premium over the ARM flavors, though this may also come with more storage or other premium options, like high resolution LCDs. It's not yet clear how much leeway the ODM's have when designing products for ARM vs. x86, or whether Microsoft has placed restrictions on RAM, resolution, and other factors that would presumably be used to make x86 the premium option.