What happens if (when) Apple release a smaller iPad at $199? Should MS try to beat that price point taking a larger loss?

And let's suppose that MS gets in the door as far as unit sales go, and moves to a comfortable number 2 in this space thanks to the loss-leader Surface. How many sales of the higher priced x86 units will they have cannibalized? How many OEM sales suffering the same fate? Where will they make money, from transaction fees on app sales through their store?

It's a tough road - and this isn't the console market where this kind of thing has been done a few times before with marginal success.

They're going to be losing a boatload of money selling a 10" tablet at $200 and probably completely destroy the market for any/all licensees. If they can hold out a few years until the technology costs allow for a profit, I suppose it could pay off. But that's a big if and then some serious deficits to make up for. All in a market that is already completely dominated by someone else. MS has been down this road before with Zune.

Now that this rumor has received such press, what's going to happen if the tablet comes out at $299 or $399?