Cracks starting to show in Microsoft Surface
Jul 19, 2013, 8:38 AM | Updated: 8:52 am
Microsoft has taken a huge hit for slow sales of the Surface RT tablet computer.
The software giant on Thursday booked a near billion dollar write-off to its Surface RT business after it slashed prices on the tablets to stimulate demand this week.
“It is a lot of money. No matter what, it is a large chunk of Microsoft’s revenue. Microsoft still has tens upon tens of billions of dollars in the bank, but $900 million is a big chunk,” says GeekWire‘s Todd Bishop.
Microsoft’s fourth-quarter financial results came in well-below analysts’ expectations Thursday, and one of the biggest reasons was slow sales of the Surface RT.
Bishop says the Surface RT has some inherent problems, firstly it’s not an iPad.
“It’s stuck in this netherworld in between the iPad with all of its apps, and traditional Windows machines with all of the legacy programs that everybody loves on Windows.”
The reason Surface’s struggles are a big deal to Microsoft, Bishop explains, is because this was the company’s first foray into computer hardware.
“This was their first computer and it’s really a struggle for the company that they have not seen success with this.”
Microsoft began selling Surface tablets in October. The company shipped about a million tablets in the first three months of 2013, according to research firm IDC. That includes about 260,000 of the slimmed-down RT version and 750,000 of the Pro version of Surface, which is compatible with older Windows programs.
The shipments gave Microsoft a meager 2 percent share of the tablet market. Apple Inc. remained the leader with 39.1 percent and was followed by Samsung Electronics Co., AsusTek Computer Inc., Amazon.com Inc. and Acer Inc.
So what’s next for the Surface RT?
“If it continues to fall flat for the next couple years, then they’ll pull it, and rely on their partners for these ARM-based tablets to compete with the iPad,” says Bishop.
Microsoft’s shares plunged nearly 7 percent to $33.10 in after-hours trading Thursday. In addition to the Surface news, poor reception of Windows 8 was also blamed for the fall.
But Bishop says don’t count Microsoft out, they’re good at staging a comeback.
“Microsoft will regroup. They’ll attempt to come back again. That is the one thing this company is good at, continuing to come back and come back in a market like this until they sort of get it right.”
The Associated Press contributed to this report.
