Why Does Microsoft Want To Buy Your Used iPad?

Moneybox
A blog about business and economics.
Sept. 28 2013 10:09 AM

Microsoft Offering Trade-in Deals for iPhones and iPads

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A employee demonstrates the photo capabilities of the Nokia Lumia 1020.

Photo by TIMOTHY CLARY/AFP/Getty Images

I was a little surprised to find in my inbox yesterday these Microsoft promos offering me trade-in credit for my iPhone or iPad at the Microsoft Store. The basic logic of trade-ins makes perfect sense, of course, but given Microsoft's large scale and core competencies it doesn't seem like getting into the used iOS device reselling industry is going to be a particularly lucrative new line of business for them:

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Probably the best way to think about it is as a kind of price discrimination strategy. Microsoft has only a pathetic share of either the tablet or the high-end smartphone market at this point. There are two ways they could improve on that. One is to become the phone or tablet of choice for people who don't currently own a tablet or fancy smartphone. The other is to persuade people to switch. The trade-in is a way of offering a lower price point to potential switchers on the theory that the long-term value of converting an iPad owner into a Surface owner exceeds the topline revenue of selling a single Surface. 

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It doesn't seem particularly likely to work to me, but it's a reminder that despite its poor performance in these markets Microsoft really is a formidable competitor. Its Windows, Office, and enterprise software lines of business give it lots of time and money to work with that few other firms have.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

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