Microsoft Must Write-Down Almost $1 Billion on Surface RT Flop

[dgstorm]

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.

Source: BGR

 

[Uncensored2008]

The problem is that Microsoft again released a sub-standard product that detracts from a solid product. The RT with a scaled down OS and sluggish performance served only taint the late arriving Surface Pro - which is a great product.

My concern is that the fiasco of the RT will kill the Pro, to a public that doesn't grasp the difference in the products.

 

[FFX]

I'm so tired of all the Microsoft bashing that every tech site is pushing, why are they doing this? Is it because of a lack of news? Is there really a need for a front page every day on every tech site bashing Windows/Microsoft, and praising Apple for doing nothing. If a tech site is reviewing a product with Windows 8 or RT, they are sure to bash the OS and Microsoft more then the company who actually made the device, and sure enough squeeze in some advertisement for Apple. I recently read a review of a 7" tablet which got bashed for not having retina display, and they recommended buying the iPad mini (which hasn't got a retina display either but the tech sites doesn't seem to care about that).

 

[TheConstruct]

I think calling RT a flop is shortsighted. And I have never had any issues with performance with my unit.

 

[zhenya]

I'm not sure how it's short-sighted. How many other hardware manufacturers are jumping on the RT bandwagon? Planned products are being dropped. Intel's new push into mobile is making RT somewhat obsolete - and frankly, if that's the case, RT has fully served it's purpose. RT was a hedge by MS in the mobile space. It forced Intel's hand in putting R&D into mobile chips. That's what MS wanted, and if it hadn't worked, at least they'd have a working alternative.

For those of you who purchased an RT, if the alternative product existed - a tablet with the same size, weight, battery life and performance as your RT, but it ran full Windows, for the same price or maybe $50 more, would you have still purchased the RT? If so, why?

 

[jnjroach]

I would purchase RT again even over an ATOM CPU because, number one, Intel's poor track record on Drivers and Support (Haswell has been all over the place with battery life from poor to excellent). RT is much more secure than x86 because of its inability to install traditional Win32 binaries. The issue with any x86 platform with backward compatibility is when you install, I don't know, let's say Access 2003 on a Windows 8 machine and it acts up you blame the OS, so you go in and adjust the security of the underlying OS to make the legacy program work (this is true on any legacy Win32 Application). My only wish on the RT is an Active Digitizer.

 

[zhenya]

I agree with you regarding the security and performance issues being in RT's favor. In fact I've often used those same arguments in defense of RT. The problem is that the general populace is ignorant of this, and if they want a limited device, there are other options that seem to fill their needs better. Microsoft has done little or nothing to convince consumers as to why RT is a good choice.

I just don't see any positive news on the horizon for RT. How many RT tablets are available for purchase in any given market today?

 

[jnjroach]

Actually the same argument can be said for all Windows 8 Tablets, if you look at Web Trend Analytics, the Surface RT is the number one Windows 8 Tablet hitting websites. RT is the IE of the 21st century, MS has to make it work, that is why I see the Phone and RT OS's merging into an ARM OS that eventually removes the desktop completely.

The only reason the desktop was there in the first place is the Office Team refused to make Modern UI versions then reluctantly created OneNote and Lync versions, once Gemini is in play there will be no reason to use the desktop paradigm on ARM.

 

[kristalsoldier]

I would purchase RT again even over an ATOM CPU because, number one, Intel's poor track record on Drivers and Support (Haswell has been all over the place with battery life from poor to excellent). RT is much more secure than x86 because of its inability to install traditional Win32 binaries. The issue with any x86 platform with backward compatibility is when you install, I don't know, let's say Access 2003 on a Windows 8 machine and it acts up you blame the OS, so you go in and adjust the security of the underlying OS to make the legacy program work (this is true on any legacy Win32 Application). My only wish on the RT is an Active Digitizer.

I fully agree! This is the only thing that I think the RT is missing and I wish MS had included this in the capability profile of the RT right from the start.

 

[TheConstruct]

The fault of RTs poor sales falls solely on Microsoft and their Marketing Department. Those first commercials were completely stupid, they may as well have been ads for shoes. It has only been in the last few weeks that the ads have begun showing what RT is capable of. I thought long and hard before picking between Pro and RT, the deciding factor was battery life. If there was a Tablet on the market that lasted all day and ran my legacy apps, heck yeah I would opt for that, but it will be a very long while before x86 meets the Power/Watt of Arm. You also have to remember the Surface is a flagship device. The other RTs are just as capable, just made less expensively.

 

[zhenya]

The fault of RTs poor sales falls solely on Microsoft and their Marketing Department. Those first commercials were completely stupid, they may as well have been ads for shoes. It has only been in the last few weeks that the ads have begun showing what RT is capable of. I thought long and hard before picking between Pro and RT, the deciding factor was battery life. If there was a Tablet on the market that lasted all day and ran my legacy apps, heck yeah I would opt for that, but it will be a very long while before x86 meets the Power/Watt of Arm. You also have to remember the Surface is a flagship device. The other RTs are just as capable, just made less expensively.

It won't be a very long while; to some extent it's already here today. The Thinkpad 2 Tablet is thinner and lighter than an iPad and has 10 hour battery life while running full Windows. As Intel puts some much-needed resources into Atom, the chips will only get better and better. Haswell should allow Microsoft or someone else to build a 'new' Surface Pro today with 10 hour battery life. This is the problem I see for RT - once people can get all-day life from a full Windows device, why choose the one that only runs stuff from the Store?

 

[jnjroach]

Remember that these battery numbers for the Intel CPUs are running on virgin machines, once people start installing all of their crap on these machines because they can the battery numbers start to drop and all of sudden we hear...."this doesn't happen on Android or iOS". So much of the x86 code is built around the desktop paradigm that the developers ignore the need for mobile professionals, with the Modern UI stuff because of the WinRT constraints these programs don't prevent the machines entering S0iX Connected Standby, which is the key to all day battery life...