Microsoft is taking a charge of $900 million related to its Surface RT tablets, stating that it believes recent price cuts will “accelerate Surface RT adoption and position us better for long-term success”.
The tablet, which is powered by a stripped-down Windows platform called Windows RT, has received a lukewarm reception, not aided by its price tag – which has put it on a par with Apple’s high-end iPad devices.
Windows RT, which has not been widely supported by other computer makers, does not offer application compatibility with other Windows products, meaning that the number of apps available to users is limited – unlike for the iPad.
And with users not buying the premium-priced Surface, due in no small part to the lack of apps, this has presented developers with a limited audience, putting the platform a long way down the priority list – and well after Apple (iOS) and Android tablets.
Amy Hood, the company’s CFO, said: “Surface is one part of our journey to bring innovative, compelling Windows devices to market in the modern era of computing. With each step, we analyse our progress and fine-tune our action plan as needed.”
Microsoft’s recent cuts to the price of its Surface devices were responsible for the $900 million charge, along with an inventory value adjustment for related components and accessories.
In its conference call, the computing giant said that its Surface products – which also includes a fully-fledged Windows 8 device – are available across 10,000 retail locations in 29 markets.
In the mobile space, aside from Surface, Microsoft only made a passing reference to Windows Phone, stating that “progress continues as our partners, including Nokia, Samsung, Huawei and HTC are delivering new phones at a broader range of price points”.
The problem Microsoft is facing is that it is struggling to capitalise on growth in mobile devices including tablets, which is eating into its core PC operation.
Hood said: “The consumer x86 PC market declined as users continued to prioritise devices with touch and mobility. At the same time, we saw continued strength in our enterprise products and cloud solutions, and increased adoption of our consumer services.”
For the quarter to 30 June 2013, on group level, the company reported net income of $4.97 billion, compared with a prior-year loss of $492 million, on revenue of $19.9 billion, up from $18.06 billion.
In its core Windows division, revenue fell by 5 per cent, as enterprise robustness partially offset what Microsoft believes was a “more than 20 per cent” decline in the consumer PC market.
The company does not break-out figures for its mobile activities.