Microsoft took a $900 million write-down on its fourth-quarter financial results due to unsold Surface RT tablets. The message from the company's executives was clear: "We have to do better."
The price of the Surface RT was slashed at the start of this week: by $150 in North America, and by £120 in the U.K.. In a call with investors following the publication of Microsoft's financial results, newly installed CFO Amy Hood claimed that the price-cut would "accelerate adoption" of the device, even as it pummelled the company's bottom-line.
"As a result of this price change as well as inventory adjustments for related parts and accessories we recorded a $900 million charge to our income statement," Hood said.
Microsoft certainly isn't abandoning Surface: in the last quarter it significantly increased its retail presence, with more than 10,000 outlets now stocking the Surface range. More importantly, the company's executives repeatedly referred to the declining market for PCs, with tablets and smartphones the obvious destination for its core Windows business.
And that Windows business is beginning to struggle. While still a big earner for the company, the division's revenue declined by 5 per cent in the quarter, which, coupled with the impact of the Surface RT's poor performance, elicited some humbling statements from Hood.
"This quarter our Windows business declined as the device market continued to evolve beyond the traditional PC," she said. "We are working to transition the business into this modern era of computing taking advantage of the new scenarios enabled by Windows 8. As we said before, given the complexity of the ecosystem this journey will take but we continue to make incremental progress.
"We are working hard with our partners to gain share in the evolving and growing device markets. I want to be very clear, we know we have to do better and that's one reason we made a strategic and organizational changes we made last week. With over 1.5 billion Windows users around the world, a transition of this magnitude takes time. We are confident we are moving in the right direction."