Microsoft Surface tablet with Windows RT to start at $499

Leaked prices for Microsoft Surface reveal the tablet will not undercut Apple's iPad, as the entry-level 32-gigabyte model will cost $499.

At $499, Microsoft Surface will match Apple's starting price for the third-generation iPad with Retina display. Microsoft's entry-level offering will have twice the capacity of Apple's 16-gigabyte iPad, but the Surface also has a lower resolution 1,280-by-720-pixel 10.6-inch screen.

The basic model also comes without a touch cover, TechCrunch revealed on Tuesday. The keyboard cover accessory will be available with the Surface tablet for $599, while a top-of-the-line 64-gigabyte model with touch cover will run $699.

Microsoft's leaked pricing also confirms an earlier rumor that initial Surface hardware would be Wi-Fi-only. Apple also offers its iPad with cellular data connectivity at a $130 premium over the Wi-Fi models.

Microsoft has high hopes for the Surface, and plans to produce between 3 million and 5 million units in the fourth quarter to sell during the holiday season, The Wall Street Journal reported on Tuesday. That's said to be comparable to orders that Amazon placed for its Kindle Fire as well as Google's orders for Nexus 7 tablets.

However, market leader Apple is said to have ordered 10 million units for its anticipated "iPad mini" ahead of the holiday shopping season. Apple's smaller 7.85-inch iPad is expected to expand its tablet lineup, joining the existing full-size 9.7-inch model.

Microsoft Surface will go on sale next Friday, Oct. 26, alongside the new Windows 8 operating system. But the Surface will run its own unique OS known as Windows RT that is designed for devices powered by ARM processors.

While Windows 8 for traditional X86/64 processors will be available at retail, Windows RT will only be available preinstalled on PCs and tablets powered by ARM processors. Windows RT includes touch-optimized desktop versions of Microsoft Office, but will not run traditional third-party applications designed for Windows 8 PCs.

The Microsoft Surface will target the high end of the tablet market while Apple is expected to venture into the lower end with its new 7.85-inch model with a lower price point. Currently, Apple's entry level iPad is the $399 16-gigabyte iPad 2.