Home' Trinidad and Tobago Guardian : July 23rd 2013 Contents Microsoft cut the price of Surface RT from US$499
to US$349 on Sunday, a move designed to spur sales
amid sluggish demand.
Tuesday, July 23, 2013 www.guardian.co.tt Guardian
Less than a year after Microsoft
entered the tablet computer market
with the Surface, the cracks are start-
ing to show.
The software giant on Thursday
booked a large write-off to its Surface
RT business after it slashed prices on
the tablets to stimulate demand this
Its quarterly earnings results also
showed that Windows 8, an operating
system designed to bridge the divide
between PCs and tablets, has been so
poorly received that it contributed to
a revenue drop in its operating system
The missteps in both strategic prod-
uct lines disappointed Wall Street and
shares plunged nearly seven per cent
to US$33.10 in after-hours trading
The write-down for expected losses
on the Surface RT tablet amounted
to US$900 million. Even without it,
Microsoft s results would have fallen
short of expectations.
The results came a week after the
company announced a major reor-
Microsoft Surface flops in tablet market
ganisation to help it trans-
form into a "devices and
services" company that is
less reliant on providing
software for personal
computers. The earnings
miss raised new questions
as to whether the transi-
tion will succeed.
"It doesn t inspire a lot
of confidence," said
Nomura Securities analyst
Rick Sherlund. "You re in
the hardware business
now, and pretty shortly
after entering it you have
a pretty big write down.
That s embarrassing."
Both Windows 8 and
the Surface tablet repre-
sent Microsoft s big bets on the tablet computer
market as PC sales continue to decline.
Research firms IDC and Gartner said last week
that global PC shipments fell 11 per cent in the
April-June quarter. It was the fifth consecutive
Acknowledging the company s difficulties with
the change, Microsoft Chief Financial Officer Amy
Hood told investors on a conference call that "this
journey will take time."
"We know we have to do better," she said. "We
are confident we are moving in the right direc-
Microsoft cut the price of Surface RT from
US$499 to US$349 on Sunday, a move designed
to spur sales amid sluggish demand.
Microsoft began selling Surface tablets in October
2012. The company shipped about a million tablets
in the first three months of 2013, according to
research firm IDC.
That includes about 260,000 of the slimmed-
down RT version and 750,000 of the Pro version
of Surface, which is compatible with older Windows
The shipments gave Microsoft a meager two per
cent share of the tablet market. Apple Inc remained
the leader with 39.1 per cent and was followed by
Samsung Electronics Co, AsusTek Computer Inc,
Amazon.com Inc and Acer Inc.
Microsoft also saw revenue from its flagship
Windows operating system decline six per cent in
the recent quarter after excluding the late recognition
of revenue from last year, when it offered discounted
upgrades to users of older versions of Windows.
Consumers haven t responded well to Microsoft s
latest operating system, Windows 8, and the results
reflect the poor reception.
IDC has said the new operating system is con-
tributing to the longest slump in the history of
personal computer sales. Gartner disagrees that
Windows 8 is to blame.
Brendan Barnicle, an analyst with Pacific Crest
Securities, said the entire PC market is undergoing
a massive shift, especially as device makers increas-
ingly develop their own operating systems, like
Apple Inc and Google Inc do for their tablets and
"Microsoft can t charge US$100 per device for
Windows the way they could 20 years ago," Barnicle
In a sign that Microsoft is adjusting, the company
said it expects to derive 65 per cent of Windows
revenue from third party computer manufacturers
in the July-September quarter, down from 75 per
cent a year ago, prior to the Surface launch. More
Windows revenue is coming from its own Surface
Revenue and profitability improved in Microsoft s
other lines of business, including enterprise software,
servers and tools, the Xbox video game division
and the Bing search unit, but those results also fell
short of analysts forecasts. (AP)
The missteps in
Wall Street and
nearly seven per
cent to US$33.10
trading that day.
losses on the
Surface RT tablet
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