Microsoft takes $900 million charge on unsold Surface RT tablets

Shawn Knight

Posts: 15,255   +192
Staff member

microsoft surface

Microsoft on Thursday posted lower than anticipated earnings which sent shares plummeting in afterhours trading. If that weren’t enough, the company also took a $900 million charge on unsold Surface RT tablets.

For the fiscal fourth quarter, Microsoft’s revenue increase 10 percent to $19.9 billion led by solid sales of the company’s Office suite of applications. Even still, however, it fell short of analysts’ average estimates of $20.7 billion. Overall, Microsoft turned a quarterly profit of $0.59 per share which looks solid compared to the $0.06 loss from the same time a year ago but fell well short of Wall Street’s estimated $0.75 per share profit.

Brendan Barnicle, an analyst at Pacific Crest Securities, said it was the biggest miss that he can remember from Microsoft. It simply looked like everything was weak, he noted.

Last week, Redmond announced a company-wide reorganization that is said to better align itself with its new focus on devices and services. CEO Steve Ballmer told employees via memo that the reshuffling will allow Microsoft to innovate with greater speed, efficiency and capability.

And just earlier this week, Microsoft slashed the price of their Surface RT tablet in a move that now makes a lot more sense given the $900 million write-off. The slate, originally priced at $499 for the 32GB model and $599 for the 64GB unit, is now priced at just $349 and $449, respectively.

Share prices dropped by more than six percent in afterhours trading as of writing following a five year high. Stock is Microsoft was up 32 percent this year before the mass selloff following the earnings report.

Permalink to story.

 
Sell those Windows Surface RT for $99 bucks right now, then watch them fly off the shelves, like they did with the cabbage patch dolls in the 1980's.
 
That's only 2% profit. It's easy to look at a number in the billions and say that good enough, but you really need a bigger return than 2% no matter the total dollar amount.
 
I was looking forward to the Surface as an alternative to my laptop. But terrible advertising strategy. They had young people around a conference table dancing! Who were they targeting? There is usually at least one "middle aged manager type" person in most meetings in any office around the world. Not a single manager type person in that commercial. In contrast, I was not an iPad fan when it was launched, I saw the commercial when they showed how to turn a page. I was sold at that point. Ballmer is very rich and one of the best operational managers in corporate history, a visionary he is not. Steve Jobs knew exactly how to market his tablet.
 
If they go too much cheaper, they wont make any money on them, if you think about it, these things are a decent buy for what your getting. I got the PRO version, but even the RT was pretty good as far as tablets go. Im not saying go out and buy one, they are the best thing ever, I just think a lot of people are ignoring them based on the fact they don't like Windows 8, mine surface works very well and is quite fun to use.
 
I was looking forward to the Surface as an alternative to my laptop. But terrible advertising strategy. They had young people around a conference table dancing! Who were they targeting? There is usually at least one "middle aged manager type" person in most meetings in any office around the world. Not a single manager type person in that commercial. In contrast, I was not an iPad fan when it was launched, I saw the commercial when they showed how to turn a page. I was sold at that point. Ballmer is very rich and one of the best operational managers in corporate history, a visionary he is not. Steve Jobs knew exactly how to market his tablet.
Perhaps you didn't intend to but from what you posted it sounds like you base your buying decisions exclusively on commercials. You are certainly free to do so but I would look into it a bit more than that.
 
If this was $400 with a keyboard and the desktop was more flexible, I would give you my money right now.
 
Sell it cheaper and for 150-250$ equivalent, I'm buying. :)

I agree they need to sell them cheaper. If they want Windows 8 to have a chance take a loss on the surface and start to saturate the market or your gonna lose!

Everyone I talk to hates Windows 8. That a image they need to change. The need to fix Windows 8 o the desktop and sell the surface cheaper. Then they will start doing better. I don't think 8.1 is going to change the mind of desktop users much. I will still have to install start8. I get calls all the time from people with new computers. Windows 8 is just way to confusing for normal basic users who just want to be on the internet and do their basic stuff.

I might buy one at $199 with keyboard...but not at $349. Still too expensive. They should compete with Android not iOS!
 
Ohh that's lovely it didn't post anything I said...not typing all that again.

But I agree sell it cheaper. $199 with keyboard and I will but one
 
I was looking forward to the Surface as an alternative to my laptop. But terrible advertising strategy. They had young people around a conference table dancing! Who were they targeting? There is usually at least one "middle aged manager type" person in most meetings in any office around the world. Not a single manager type person in that commercial. In contrast, I was not an iPad fan when it was launched, I saw the commercial when they showed how to turn a page. I was sold at that point. Ballmer is very rich and one of the best operational managers in corporate history, a visionary he is not. Steve Jobs knew exactly how to market his tablet.

I agree... Microsoft wanted to compete with the iPad so they tried to be cooler than Apple. In my opinion, they could be cooler than Apple, but you can't do it by standing on a table and telling everyone you're cooler than Apple.

Remember the Apple vs. PC commercials where that trendy hipster looking dude would talk to the chubby guy in the suit and glasses? that's how you do it... Like how Samsung made themselves cooler than Apple by showing adults at the grad party bumbling on their iPhones while the grads used Galaxies. You have to let the consumer decide who's cooler.
 
Lol! are they really surprised?it's a wonder it didn't hit a 1.+B write off.lowering the price still is not gonna help any.
 
Lol! are they really surprised?it's a wonder it didn't hit a 1.+B write off.lowering the price still is not gonna help any.

Whether they took a hit from the Surface sales or not, they'd still need to lower the price to move the rest of the inventory, so they can make way for Surface 2.
 
I actually received an email from microsoft offering to sell me one. I figured I'd take a look so I clicked the link and wasted 15 mins trying to find it.
 
Whether they took a hit from the Surface sales or not, they'd still need to lower the price to move the rest of the inventory, so they can make way for Surface 2.[/quote]

Ha,whens the last time m$oft lowered the price on anything to clear room for something?especially when it's only about a year old.surface 2 will suffer the same fate.I think most people
know this(except microsoft of course)
 
The only question is how long Microsoft will pursue their failed Windows 8/Metro strategy before they come around. To the consumer, Microsoft *is* the PC desktop. Nobody wants their PC to look and act like a phone. They should completely retool Metro to make it attractive and user-friendly like other mobile UIs and sell it only on phones and tablets.
 
The only question is how long Microsoft will pursue their failed Windows 8/Metro strategy before they come around. To the consumer, Microsoft *is* the PC desktop. Nobody wants their PC to look and act like a phone. They should completely retool Metro to make it attractive and user-friendly like other mobile UIs and sell it only on phones and tablets.

Agreed
 
If they go too much cheaper, they wont make any money on them, if you think about it, these things are a decent buy for what your getting. I got the PRO version, but even the RT was pretty good as far as tablets go. Im not saying go out and buy one, they are the best thing ever, I just think a lot of people are ignoring them based on the fact they don't like Windows 8, mine surface works very well and is quite fun to use.

Silly people, not purchasing Surface RT tablets just cuz it has Windows 8 installed. People are so shallow. ;)
 
Tablet
Android - $59 and up (32GB)
Surface RT $349 and up (32GB)

Prices should be like this...

Tablet
Surface RT $99 to $149
Surface Pro 32-bit Powered by Intel Atom Dual Core 1.8GHz $199 (32GB)
Surface Pro 32-bit Powered by Intel Atom Dual Core 1.8GHz $249 (64GB)
The other 64-bit i5 Surface Pro really expensive..

Nothing to do with Windows 8 on there, it has to do with pricing these tablets.
Microsoft pricing is high since everyone including the Corp VP, Corp CEO get high salaries
so they pass down those high wages in higher cost for the Surface Tablets.

To restructure a company like Microsoft on whole needs to start from the Corp top and work down.
It's all about profits with them not about the customer needs or what they can get for they're money today.

Windows 7 will be the last of it's kind and everyone uses it more than Windows 8. Things will change
in the coming years. Surface will sell more but right now, Microsoft needs to get it's Corp House in order!
 
Sell them cheap and make money from apps. But unfortunately they were hamstrung by their partners into pitting the price higher so they didn't undercut other windows 8 tablets. Not ideal and its had the expected result.
 
Back