Microsoft hit as Surface struggles Jul 19th 2013, 09:01
Press Association –
Less than a year after Microsoft entered the tablet computer market with the Surface, the cracks are starting to show.
The software giant on Thursday booked a large write-off to its Surface RT business after it earlier slashed prices on the tablets to stimulate demand.
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 software unit.
The missteps in both strategic product lines disappointed Wall Street and shares plunged nearly 7% to 33.10 US dollars in after-hours trading.
The write-down for expected losses on the Surface RT tablet amounted to 900 million dollars. Even without it, Microsoft's results would have fallen short of expectations.
The results came a week after the company announced a major reorganisation to help it transform 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 transition will succeed.
Both Windows 8 and the Surface tablet represent 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% in the April-June quarter. It was the fifth consecutive quarterly decrease.
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", adding: "We know we have to do better. We are confident we are moving in the right direction."
Microsoft began selling Surface tablets in October. The company shipped about a million tablets in the first three months of 2013, according to 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 programs.
The shipments gave Microsoft a meagre 2% share of the tablet market. Apple remained the leader with 39.1% and was followed by Samsung, AsusTek, Amazon and Acer.
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