Story image

Microsoft takes US$900m Surface hit

22 Jul 13

Microsoft's gamble on Surface RT appears to have flopped, with the software giant taking a huge $900m hit on the devices.

Despite posting revenues of US$19.90bn during the fourth quarter, the company's earnings and sales missed expectations by a relatively wide margin, with the write down of Surface RT "inventory adjustments" denting profits.

After recently lowering the cost of all its Surface RT devices, the company has suffered as a result of the ever-emerging Post-PC era, with new CFO Amy Hood attempting to put a brave face on the results.

"In many ways it reflects the trends," she said.

Claiming "we now we have to do better," Hood challenged Microsoft to "evolve beyond the PC and into the "modern era of computing."

Following CEO Steve Ballmer's new 'One Microsoft' philosophy, Hood insisted the poor showing in the PC division was the only blip, citing success in other areas such as enterprise and cloud offerings.

“While our fourth quarter results were impacted by the decline in the PC market, we continue to see strong demand for our enterprise and cloud offerings, resulting in a record unearned revenue balance this quarter," she said.

"We also saw increasing consumer demand for services like Office 365, Outlook.com, Skype, and Xbox LIVE.

"While we have work ahead of us, we are making the focused investments needed to deliver on long-term growth opportunities like cloud services.”

Microsoft's new business plan focuses on innovating with "greater speed, efficiency and capability" according to Ballmer's rally cary last week, with the charismatic CEO once again looking on the bright side.

“We are working hard to deliver compelling new devices and high value experiences from Microsoft and our partners in the coming months, including new Windows 8.1 tablets and PCs,” Ballmer said.

“Our new products and the strategic realignment we announced last week position us well for long-term success, as we focus our energy and resources on creating a family of devices and services for individuals and businesses that empower people around the globe at home, at work and on the go, for the activities they value the most.”

Microsoft has reduced prices on its Surface RT tablets by as much as 30%, in a bid to boost poor sales and shift existing stock last week.

The software company’s entry-level 32GB model has been reduced from US$499 to $349, while the 64GB model is now selling at $499, at a $150 reduction (25%).

Microsoft, which confirmed news that the Surface Pro will be made available in New Zealand, sold around 1.5 Surface devices by March this year, with over a million of the Surface RT version.

And in the wake of the major reorganisation by Microsoft and now poor financials, Techday's David Williams asks is this the desperate moves of a man trying to save his own skin?

What do you think of Microsoft's Q4 results? Should Ballmer be worried? Tell us your thoughts below

InternetNZ welcomes Govt's 99.8% broadband coverage plan
The additional coverage will roll out over the next four years as part of the Rural Broadband Initiative phase two/Mobile Black Spots Fund (RBI2/MBSF) programme expansion.
Dr Ryan Ko steps down as head of Cybersecurity Researchers of Waikato
Dr Ko is off to Australia to become the University of Queensland’s UQ Cyber Security chair and director.
Radware joins Chillisoft’s expanding portfolio
The cloud DDoS prevention, app delivery controller, and web app firewall expert is another step toward a total enterprise security portfolio.
Commerce Commission report shows fibre is hot on the heels of copper
The report shows that as of 30 September 2018 there were 668,850 households and businesses connected to fibre, an increase of 45% from 2017.
Wearables market flourishing - fuelled by smartwatches
A market that has stuttered in the past now has a bright forecast as adoption of wearable technology continues to thrive.
The tech that helped the first woman to sail around Australia
Lisa Blair used devices from supplied by Pivotel to aid her in becoming the first woman to circumnavigate Australia non-stop.
Why there will be a battle for the cloud in 2019
Cloud providers such as AWS, Azure, and Google will likely find themselves in a mad scramble to gain additional enterprise customers.
WLAN market picks up thanks to high-end products
Dell’Oro Group have released a report showing that the WLAN market picked up in 2Q18 as 802.11ax saw its first shipments.