Microsoft put a lot of time and effort into developing a version of Windows that could run on devices with ARM-based processors. Then the company went all-in and launched its own tablet running the operating system.
And it turns out it’s not selling very well. If the recent $150 price drop wasn’t a good enough sign that Microsoft is having trouble moving its tablets, how about this: in Microsoft’s 4th quarter earnings report, the company says it took a $900 million charge “related to Surface RT inventory adjustments.”
That could mean that’s the cost of marking down the price on all the unsold inventory the company still has on hand. If that’s what this “charge” refers to, it would seem to indicate that there are around 6 million Surface RT tablets lying around on store shelves and in warehouses.
Or maybe Microsoft is just marking off the full price of some quantity of devices it doesn’t expect to sell, in which case it’s not clear how many unsold tablets are out there, but there are probably a lot of them.
Overall the company’s revenue was lower for the quarter than had been expected — and the figure was off by just about the cost of that $900 million charge.
Microsoft also has to contend with declining growth in the PC market, which could hurt the bottom line of a company that makes the operating system that runs on most PCs. That’s a large part of why Windows 8 and Windows RT are designed to run on tablets and other touchscreen devices as well as desktop computers.
But there’s mounting evidence that it’s not just the Surface RT that’s not doing well — it’s the Windows RT operating system. It looks like Lenovo, for instance, also pulled the plug on its Windows RT device this week.
On the other hand, Microsoft’s eggs aren’t all in that basket. The company also introduced the new Office 365 subscription service and Office 2013 this year, and says strength of its enterprise services is helping offset challenges in the PC space.
It’s probably a bit early to write off Microsoft. The Surface RT, on the other hand, might be on or near its deathbed.
Meanwhile, Google also reported its quarterly earnings today. The company also missed analyst estimates, in its case due to a decline in cost-per-click for Google ads. Consumers are increasingly using mobile devices to access the internet, but mobile ads are still a fledgling industry.