Excitement about the Microsoft Surface continues to be very high – to the point where some manufacturers have become understandably jealous and somewhat worried – and the device’s price tag has been the subject of much speculation. When the chairman of Acer said that a $199 Surface would be bad for other OEMs last week, I immediately wrote it off as more speculation. Now, however, Engadget is reporting that $199 might actually be the Surface’s MSRP.

Let me start off by saying that I don’t believe this rumor one bit. According to the site’s source, who is simply listed as “Anonymous,” Microsoft disclosed numerous details about the Surface launch at the company’s TechReady15 internal conference. TechReady15, for those who aren’t aware of it, was held on July 23-27 at the Washington State Convention Center. While that puts it after the Surface announcement, the details are still a few weeks old at this point. We know that the Surface is launching on October 26, but $199 seems like an extremely low price for such a high-end tablet.

Last week, I theorized that Microsoft might price the Surface at around $449-$549. That would place it just below the iPad but not undervalue the product. The Surface is a very high-quality device, more akin to the iPad than the Kindle Fire or Nexus 7. Setting it at $199 would be very appealing to many customers – almost everyone I’ve talked to has said this would make it an immediate buy – but would it undervalue the device? Even if it doesn’t, it would still cut deep into Microsoft’s earnings. Then again, with Microsoft set to make 30% of the profit on all apps sold through the Windows Store – which, by the way, is the only way to install apps on the Surface – losing some money on the device itself might not be a bad idea. And if it causes customers to buy the tablet in droves, dramatically increasing adoption of tablets and Windows 8 in the process, it might even make some sense.

There’s also another option. What if Microsoft does plan to sell the Surface for $199 – but with a contact of some sort? The company already offers the Xbox 360 with a Kinect sensor and Xbox LIVE Gold for $199 with a two-year contract of $15 per month. Extending this business model to the Surface wouldn’t be out of the question. The company could decide to give customers special $199 pricing if they purchase it alongside something like the Zune Music Pass, Xbox LIVE Gold, Office 365, or an as-yet-unannounced service.

For now, however, I wouldn’t get your hopes up. A $199 Microsoft Surface sounds way too good to be true. It’s theoretically possible that Microsoft might price it that aggressively – unlike that insane $1,000 rumor – but it seems highly unlikely. What do you expect the Surface to cost?

[Engadget]