Microsoft (MSFT), clearly in panic mode about its Windows tablets, is adopting a last-ditch tactic to boost sales.
Bring an iPad to a Microsoft Store, and they’ll hand you a gift card for a minimum of $200. The catch is you must spend that cash in-store, and given that you’ve just handed over your iPad, Microsoft would like very much if you spent the money on one of those discounted Surface RT tablets it can’t seem to get rid of.
Better yet, hold on to the gift card for a bit and wait for the second-generation Surface tablets to be released — Microsoft would love nothing more than to see the launch numbers for the do-over Surface boosted, even if some of the sales are subsidized by those gift cards.
It’s kind of like the old “Cash for Clunkers” that helped spur new auto sales during the recession, except Microsoft is trying to call a new iPad (or even an iPad 2) a clunker.
Other consumer electronics manufacturers hold similar promotions, the difference being that they reward their existing customers for trading up to a new device. Apple (AAPL), for example, began offering an iPhone trade-in program this year. Bring in an old iPhone, get credit towards a new one.
Electronics retailers often hold trade-in events as well, but they’re device agnostic. They just want you to trade in a device for store credit that you then use to buy something else — anything else.
Wireless carriers? They’re famous for letting you trade in your old smartphone for the latest model. It’s a great way to keep you under contract and upsell you on bigger data plans for the hungry new model, or a new protective case. Like the electronics retailers, they have no real horse in the game. If you want to trade in your old iPhone, they could care less if your replace it with another iPhone or a Samsung (SSNLF) Galaxy.
The devices that are traded in typically make their way into the refurbishment channel where they’re resold.
Specifically targeting a competitor’s product as Microsoft has done reeks of desperation. It also makes Microsoft the butt of jokes since it seems so unlikely that they’ll have much in the way of uptake on the offer. The timing is bad too, with the September/October promotion coinciding with the expected announcement of new Surface tablets — does Microsoft seriously want that launch tainted by analysts posting numbers on how many iPad owners actually took them up on the offer?
Sure, the gambit might pay off if the Surface 2 is an amazing device and new Windows 8 upgrades are awesome, but the odds are very long that iPad owners will make the switch, and the promotion seems destined to fizzle at best and quite likely backfire.
But what can Microsoft do with those iPads? The easy, spiteful thing to do would be to toss them in the Dumpster. But if perfectly functional iPads start showing up in landfill, they’re going to end up with Greenpeace protesting outside stores again. That’s not the kind of PR Microsoft needs.
However, if it refurbishes and resells the iPads — possibly dumping them on eBay (EBAY) or donating them to a third-world educational initiative – Microsoft is recontributing to iOS tablet market share. Even worse, it risks having those demographics hooked on Apple’s device. I’m sure Tim Cook would thank Steve Ballmer (or his replacement) profusely for helping to introduce its tablet to a market that Apple can’t tap itself without first introducing a low-cost, low margin iPad.
If you have an iPad that you seriously hate and is in working condition, and you have an intense craving to replace it with a Surface RT or Surface Pro, then you’ll love this deal. In that case, head down to the Microsoft Store. You’ll have to push past the lineup of people waiting for Apple’s new iPhones, by the way, and you’re likely to see the same thing in a month or so when new iPads hit.
I doubt you’ll see similar lineups at Microsoft Stores when the next Generation Surface tablets land, even with those gift cards in play.
UPDATE: Microsoft also has unveiled another trade-in program in partnership with privately held Clover Wireless. This one is a bit more complicated, requiring the device to be mailed to Clover and a prepaid Visa card for up to $350 for use in buying a new Microsoft tablet or Windows Phone. For this program, they’ll not only take iPads, but iPhones, BlackBerries, Dell (DELL) tablets and mobile devices from dozens of manufacturers. Microsoft also says it will pay to have traded devices “properly recycled.” If the original iPad trade-in program seemed tacky, this one seems designed to turn Microsoft Stores into pawnshops. Still reeks of desperation.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.