Surface RT tablet, the company's first big push into hardware, led to
speculation that it was close to releasing a new version. Turns out
the reason was even simpler: Nobody's buying the thing.
In its exceptionally bleak earnings report yesterday, Microsoft took a
stunning $900 million writedown on inventory for the Surface RT, which
launched in October, starting at $500 ($600 for double the storage
capacity). On Sunday, the company knocked $150 off both models; Mark
Hachman's back-of-the-envelope math ballparks the unsold inventory at
6 million tablets, compared with maybe 1.8 million sold. This is after
a June promotion that offered the device to schools and universities
for as much as 60 percent off.
That doesn't bode well for future iterations of the Surface, or for
Microsoft's plans to move further into the hardware market. Chief
Executive Officer Steve Ballmer's prepared earnings statement made
reference to new Windows 8.1 tablets and PCs among the "compelling new
devices" Microsoft has planned. While the Surface has scored some
decent reviews and the price cut can't hurt, it's unclear how the
company plans to compel people.
For now, Microsoft is still relying heavily on its PC software and
enterprise businesses. They helped push the company's revenue up 10
percent to $19.9 billion, though it fell well short of analyst
estimates. On last night's earnings call, CFO Amy Hood was asked when
she expects Microsoft's tablets to compensate for the contracting
consumer PC market. Points for honesty: "It will take a long time for
that to happen," she said.
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