Editor in Chief
Microsoft just shared their most recent earnings call to investors, and it turns out that the Surface RT isn't just a flop, it's a monumental flop. According to Microsoft, they will have to write-down the losses on too much inventory of the Surface RT tablet to the tune of $900 Million dollars. Here's a quote with some of the details,
Microsoft’s mistakes during the launch of its first tablet were obvious to many people, but it was still shocking to hear on Thursday that the company would write down a whopping $900 million due to excess Surface RT inventory. ZDNet’s Mary Jo Foley, who knows Microsoft better than just about any other reporter out there, finds herself similarly baffled that the company overestimated demand for the Surface RT by as much as 6 million units. What’s more, after talking with some of her sources, Foley still hasn’t come up with a satisfactory answer as to how Microsoft had so wildly miscalculated consumer demand for its first foray into the tablet market.
“Isn’t this a company whose officials have prided themselves on telemetry data and visibility?” she asks. “Yes, it was the first time Microsoft was making its own PCs, but the company has made its own gaming console, mice and keyboards in the past, so there were people at the company who knew a considerable amount about supply chains.”
When Foley talked with Brian Hall, Microsoft’s general manager of Surface marketing, he only said that the company knew it needed to get the Surface RT into the hands of more consumers, which is why it recently slashed the price on the device to $350. Even so, Foley worries that this wouldn’t make too much of a difference because the Surface RT still lacks key apps and because it “still feels sluggish, thanks to the Tegra ARM processor powering the device.”
Despite these "less than rosy" results, things aren't completely grim for Microsoft. They have aggressively cut the pricing on the Surface RT to $350 USD, and they are well on their way toward transforming their business. Sometimes transitions cause deep pains, and that is the nature of adapting to markets. Consumers are a fickle lot.
In the end, Microsoft probably knew the Surface RT wouldn't see much success, but it was never about that initial battle. It's basically a giant marketing stunt designed to alter the public consciousness, so that in the future we view Microsoft as more than just a software company.