Is Microsoft's Surface RT $199 Away From Zero?

The stealth discounting of Microsoft's (NASDAQ: MSFT  ) struggling Surface RT tablet continues. 

Tech blog Engadget is reporting that Microsoft is allowing school educators to order the portable devices that hit the market late last year for as little as $199 apiece, a seemingly dramatic 60% savings off the $499 retail price.

There are a few caveats here. For starters, the promotion is only limited to school administrators. This isn't the educator and student discount that Apple (NASDAQ: AAPL  ) and Microsoft routinely offer to get individual students and teachers to buy into their ecosystems at a slightly discounted price. The goal here is to get administrators of grade schools and colleges to buy the systems in bulk. There are no minimum quantities required on the order form, but the intent is reasonably clear.

The steep markdown is also limited to the 32-gigabyte Surface RT that has been widely criticized because more than half of that capacity is taken up by Microsoft's programs. The actual capacity out of the box is a mere 15 gigs. Is Microsoft merely trying to unload its excess inventory of entry-level RTs? Why isn't it offering the 64-gig tablets that have three times the user storage capacity? 

They're certainly not selling in any configuration. Industry tracker IDC reported recently that just 200,000 of the nearly 50 million tablets shipped this past quarter were Windows RT devices. There must be a lot of these suckers collecting dust. There's no way that Microsoft fathomed commanding just 0.4% of the market that Apple continues to dominate with Google's (NASDAQ: GOOG  ) Android gaining serious momentum.

Another thing to watch here is that the $499 retail price isn't really the sticker these days. Microsoft is including a touch or type cover with all Surface RT purchases these days, and that's a configuration that will set administrators back between $249 and $289. The discount on the type covers isn't as significant as the touch covers that were supposed to set the Surface RT apart, and that's another indicator that things just aren't going Mr. Softy's way these days.

Cracking the education market won't be easy. Too many schools have already gone iPad, and while Apple would never follow Microsoft all the way down to $199 to grab the country's youth while they're still in their formative years, schools looking to save money on the pricey iOS can turn to Google's cheaper tablets and possibly even the $199 Google Chromebook netbook.

There's also one big knock working against Microsoft here. School administrators aren't dumb. They've seen Microsoft kill the Kin within weeks and the Zune within months. There are no guarantees that Microsoft will keep Windows RT around if it continues to struggle. It doesn't have a choice with Windows 8, and it wouldn't be a surprise if the software giant backed away from RT -- and naturally the Surface RT -- in the near future. That's a far cry from the comfort in knowing that Apple's iOS and Google's Android will still be actively supported in the coming years. 

Microsoft should've been pricing these Surface RT tablets aggressively out of the gate, and now it's getting schooled in a world where iOS and Android are the class acts of the classroom.

Microsoft got hungry too late.

Self-disruption is an art form
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