Microsoft’s Ballmer drops clues on Surface pricing and what’s ahead

Since Microsoft (s MSFT) debuted its new Surface tablet in June, the tech world has been buzzing about the possible price of the new device, with much debate centering on rumored $199 price tag.

But in an interview with The Seattle Times, CEO Steve Ballmer hinted that, with its new tablet, Microsoft is aiming to compete on features more than price. Ballmer said the “sweet spot” would be between “$300 to about $700 or $800.”

“I think most people would tell you that the iPad is not a superexpensive device. … (When) people offer cheaper, they do less. They look less good, they’re chintzier, they’re cheaper.

If you say to somebody, would you use one of the 7-inch tablets, would somebody ever use a Kindle (Kindle Fire, $199) to do their homework? The answer is no; you never would. It’s just not a good enough product. It doesn’t mean you might not read a book on it….”

The Verge points out that the company could still offer a lower price with a subscription to Microsoft’s Xbox Music service, but Ballmer’s comments seem to indicate that the vendor is planning to present Surface as a higher-end, highly functional device.

In the interview, Ballmer also said that while Microsoft was born as a software company, over the next five to ten years, the company will retain its core capability in software but evolve into more of a “devices-and-services company.”

“[That] is a little different,” he said. “Software powers devices and software powers these cloud services, but it’s a different form of delivery…. Doesn’t mean we have to make every device. I don’t want you to leap to that conclusion. We’ll have partners who make devices with our software in it and our services built in.”

Ballmer also defended the company’s so-called “stack-ranking” management system, which was called out as destructive and demoralizing in a damning Vanity Fair article in August on “Microsoft’s Lost Decade.” (In the system, supervisors are forced to place employees into tiers based on performance.)

While Vanity Fair said former Microsoft employees maintain that the system led to a counter-productive corporate culture, Ballmer said it rewards top talent and nudges lower performers to get with the program.

“I think you always want to have a system that has a chance to recognize people who are doing a great job, a good job, and helping people who are still doing maybe even a decent job, but they’re not doing as good a job as the other folks,” he said. “It helps to let those people recognize where they stand.”