MS reports $900 million loss on Surface RT

[spaulagain]

I own an RT device and I like it. Having said that, they messed up both with RT and with Windows 8. Luckily for them they're a biig company and they also make money elsewhere. They can still fix Windows 8. Unfortunately, in the process they 1) angered and confused the Windows user base 2) damaged their OEM partners who saw their sales slump because of Win 8 3) overall looked a bit retard. Their desperation about surviving in the new mobile world probably made them rush things. Intel is late in the mobile world and that probably was one of the problems, too. Whatever. It's a big challenge for Microsoft and I'm sure they will fix Windows, maybe Windows 9 will be a blast?

PC sales actually went up a little bit when W8 was released. Its not MS's fault that the desktop/laptop sales are slowing down. 80% of users don't need anything more than a tablet to do their typical computer functions like browse and watch videos. That's why Tablet sales are growing. In addition, existing PCs last a lot longer, so people don't need to replace them as often. In fact, W8 is the first OS to actually have less hardware requirements.

MS knows exactly what it's doing as it turns Windows into a touch friendly OS. They may need to make the transition a little easier on legacy users. But they are heading in the right direction. The traditional PC is morphing into a mobile PC. In 5-10 years, most PCs will be a tablet.


Surface RT/Pro were simply early to the game and with a lack of retail channels selling it, they really had a small chance to sell. I think over the next couple years, MS will prove it knew where the market was going and is actually in front of the curve for once in its life.

 

[ninjaap]

Inventory mismanagement and nothing else. Made too many for us and not enough for the rest of the world wanting them.

I agree. I think they just over estimated demand once they decided to release it in more countries. As far as we know Surface RT still outsells the Surface Pro (from last reported). So I hardly think its a flop like some are making it out to be.

 

[michfan]

Ironic ... MS got the hardware right (best designed tablet available IMO) but screwed up the software (beta operating system, buggy and poorly featured core apps, no POP3 support, extreme lack of quality apps). I still love my Surface, it kills iPad as a productivity tool.

 

[inteller]

Only dinosaurs clamor for pop3 support

 

[tungha]

ideas of a tablet that closed to a laptop is great, but may be the way they present it to the customers failed. Currently, i see most of people buy a tablet just because of entertainment such as playing games, web browsing and a little work with mail, office. This is very hard to beat the iPad of Apple.

 

[gilezzz]

PC sales actually went up a little bit when W8 was released. Its not MS's fault that the desktop/laptop sales are slowing down. 80% of users don't need anything more than a tablet to do their typical computer functions like browse and watch videos...
..MS knows exactly what it's doing as it turns Windows into a touch friendly OS..
..Surface RT/Pro were simply early to the game...

Hi Spaulagain, thanks for your comment and I would love to be as relaxed as you are about the whole thing.
But let's keep in mind that we are talking about a lot of money, a lot of customers, a lot of companies.

You are totally right that the tablets have changed the market so less people are willing to buy a traditional PC.
But you also have to remember that all of the OEMs released a flood of 1)Ultrabooks 2)Win8 tablets 3)Touch-enabled desktops 4)..and even Windows RT devices. This means spending a lot of money to invest on Windows 8 and of course to survive as OEMs. And Microsoft itself spent (and lost) a lot of money on the Surface (a tablet).

Now, the fact that anyways the market is declining basically means that all of this investment, new OS, all of the new devices, basically managed to do almost nothing.

If MS knows exactly what it's doing then the big loss they recorded on the Surface and the continuing decline of the market sound a bit out of place. I like being optimistic, but I also like being objective.

Really, I do like Windows 8, and RT (I am using an RT device to write this). I don't want to sound like the guy who rants all the time. But there is a difference between the niche of early adopters like us, who like Win 8 no matter what, and the rest of billions of Windows customers who are out there. Microsoft needs to win the market, not just a few people.

 

[spaulagain]

Hi Spaulagain, thanks for your comment and I would love to be as relaxed as you are about the whole thing.
But let's keep in mind that we are talking about a lot of money, a lot of customers, a lot of companies.

You are totally right that the tablets have changed the market so less people are willing to buy a traditional PC.
But you also have to remember that all of the OEMs released a flood of 1)Ultrabooks 2)Win8 tablets 3)Touch-enabled desktops 4)..and even Windows RT devices. This means spending a lot of money to invest on Windows 8 and of course to survive as OEMs. And Microsoft itself spent (and lost) a lot of money on the Surface (a tablet).

Now, the fact that anyways the market is declining basically means that all of this investment, new OS, all of the new devices, basically managed to do almost nothing.

If MS knows exactly what it's doing then the big loss they recorded on the Surface and the continuing decline of the market sound a bit out of place. I like being optimistic, but I also like being objective.

Really, I do like Windows 8, and RT (I am using an RT device to write this). I don't want to sound like the guy who rants all the time. But there is a difference between the niche of early adopters like us, who like Win 8 no matter what, and the rest of billions of Windows customers who are out there. Microsoft needs to win the market, not just a few people.

The OEMs released a ton of touchless laptops and desktops. Every store I went to was touchless, touchless, and touchless. They may have had 1 touch enabled device. I'm just now seeing a couple touch W8 devices at Best Buy, Walmart, etc.

Also, the OEM devices suck. Almost every device they come out with looks cheap and is built cheap. Consumers are starting to demand the high quality devices like MacBooks, iPads, etc. The Surface is the only Windows 8 device that compares to those devices. Why don't we put some blame on the OEMs where it belongs.

 

[inteller]

what's primarily the reason Microsoft is bringing boot to Desktop in 8.1, to salvage all of those touchless warmed over Win7 era POS that OEMs pushed out. My fear is the dreck pushers will enable this by default and continue to push low end dreck which will hurt the touch evolution.

 

[someoneinwa]

The headline on this thread is not accurate. Microsoft did not report a $900 million loss on Surface RT. What they did was take an immediate charge against earnings of $900 million as an inventory adjustment for the Surface RT. These are not the same thing. The charge covers the recent reduction in price for the RT plus other, unmentioned adjustments. Microsoft was honest and reported this adjustment now in conjunction with the price change on the RT rather than carry the reduced revenue expectation forward to be buried in some future quarter. As usual, they get pummeled by the usual haters plus people pretending to be financial analysts. The worst of these of course was the s***head who simply divided the $900 million charge by the $150 price reduction and concluded that this meant Microsoft had 6 million unsold RT units. That of course was fantasy, but it got reported over and over on tech blogs and even in some mainstream press.

I don't disagree with some of the posters here that Microsoft did not handle the roll out of Surface RT with the skill required. First, it was priced too high. While it is a quality product and doesn't need to be priced with the crap Android tablets, Microsoft needs to realize they can't charge Apple level prices either. The RT is now priced much closer to where it needs to be, although it should come with a Touch Cover as well. Second. I think Microsoft was timid about rolling out the product because of the need to worry about its OEM partners. My guess is they felt slow and steady steps would be received better than a massive rollout in all channels at once. Third, I don't believe Microsoft had the ability to produce the product as fast as some commenters think they can. The Surface was produced with new technology by a new team in a new production facility. I believe the ramp up to a desired production level took some time. Fourth, I think Microsoft did mis-estimate the demand for the Surface: they assumed more people would want the RT than did and they underestimated the demand for the Pro. RT is a niche product in many ways and Microsoft did not sell it that way. (The dance commercial was fine for attracting attention at launch, but should have been immediately replaced with sustained adds like the iPad comparisons running now.) That Microsoft was caught flatfooted with the demand for the Pro should be taken by the Surface team as vindication that their vision for the product was correct but many customers just wanted full Windows on a quality device.

Microsoft says they are committed to RT, both Surface and Windows. I take them at their word about that, but I'll hedge the comment by saying it depends on what happens to sales of the Surface RT at the new price point. It is still a nice product, but marketing it will be more important than ever now. The charge against earnings indicates the level of confidence Microsoft had in the Surface RT project. That level was clearly too high, but the charge shouldn't be misconstrued into meaning more than it does.

 

[tgp]

The OEMs released a ton of touchless laptops and desktops. Every store I went to was touchless, touchless, and touchless. They may have had 1 touch enabled device. I'm just now seeing a couple touch W8 devices at Best Buy, Walmart, etc.

In some cases having touchscreens is mostly useless. When I'm sitting at my desk, with two 22" LCDs in front of me, I'm not going to be operating by touch even if they were touchscreens. For one thing, my arm would get tired in a hurry. Second, it requires way more movement than using a mouse. I go from one side of my two screens to the other by moving my mouse several inches, but using touchscreen I would have to move 3'.

Touchscreen in tablets is necessary, in laptops it's useful, in all-in-one desktops it's useful, but for a traditional desktop it's mostly not practical, at least not in the current paradigm. Desktops are giving way to laptops and tablets, but they'll be around for quite awhile yet.

That said, I agree that OEMs should be pushing touchscreen laptops to get users familiar with the concept. But as long as they have a mouse & keyboard in from of them, that's going to be difficult to accomplish.

 

[gilezzz]

The OEMs released a ton of touchless laptops and desktops. Every store I went to was touchless, touchless, and touchless. They may have had 1 touch enabled device. I'm just now seeing a couple touch W8 devices at Best Buy, Walmart, etc.

Also, the OEM devices suck. Almost every device they come out with looks cheap and is built cheap. Consumers are starting to demand the high quality devices like MacBooks, iPads, etc. The Surface is the only Windows 8 device that compares to those devices. Why don't we put some blame on the OEMs where it belongs.

I agree with you on the fact that there is a lot of low-quality stuff. Dirt-cheap though. The problem is that the winning formula of Windows so far has been "I run on whatever device, same OS that you have at work, and hey you're so damn familiar with me". This is what made it so popular and what kept so many people from buying a Mac even if they had the money for one.

So, now Microsoft has become snob? ..let me imagine a meeting at MS headquarters:
"The new Windows Metro should run only on some elite devices that comply with high quality standards and reflect the new sacred philosophy!"
"But hey, this is called Windows.."
"Oh? Right! Quick! Release it! Sell it to all! Stick it on top of Windows 7, call it Windows 8! This has to run on ALL devices in the world!"

Have you tried to ask yourself why Microsoft didn't only make the Surface but released Windows 8?
Why not just make this damn Metro OS for tablets and leave it separated from Windows?
Why create this double-headed monster that is Windows 8 with its two interfaces fighting against each other?

Of course, they have their own good reasons for that. And the first is: otherwise, it would take ages to have a user base remotely comparable to Android and iOS. Why? Because Microsoft are so late.

If Microsoft had just made the Metro OS for tablets, then we could talk about devices that suck and others that don't (and I can assure you that my Lenovo Yoga 11 doesn't suck at all)

But, and read well here, they decided that this is Windows. Windows, you know? That OS with.. windows. And they called Windows 8. And it HAS to come pre-installed on whatever machine anybody puts on the market. Desktop PCs, notebooks, tablets, whatever. Not only that: but you have no choice. You buy a PC, you turn it on and bam! the tiles. No way to remove them. They HAVE to be there, even without a touch screen! A touch OS on non-touch PCs. Plus, let's remove the start button. They single-handedly decided that all traditional PCs must be screwed, with customers calling the call centers with the question "where the hell is the start button? And what are these freaking squares on the screen?".

Bold.
So, look at the big picture: this is Microsoft pushing its way through out of desperation and not considering customers and OEMs. Not the other way around.

 

[spaulagain]

In some cases having touchscreens is mostly useless. When I'm sitting at my desk, with two 22" LCDs in front of me, I'm not going to be operating by touch even if they were touchscreens. For one thing, my arm would get tired in a hurry. Second, it requires way more movement than using a mouse. I go from one side of my two screens to the other by moving my mouse several inches, but using touchscreen I would have to move 3'.

Touchscreen in tablets is necessary, in laptops it's useful, in all-in-one desktops it's useful, but for a traditional desktop it's mostly not practical, at least not in the current paradigm. Desktops are giving way to laptops and tablets, but they'll be around for quite awhile yet.

That said, I agree that OEMs should be pushing touchscreen laptops to get users familiar with the concept. But as long as they have a mouse & keyboard in from of them, that's going to be difficult to accomplish.

I disagree, touch is always useful. I'm a designer/programmer with two 23" monitors at home. At work I have two 24" monitors plus a 19" that's vertical. I would love them to be touch screen. While mouse is great for detailed work, there are plenty of circumstances where touch would be better even on a traditional desktop.

Touch is the most direct and natural way to interact with an interface. That's why this market has exploded so fast. Once people try it out, its addicting.

All new laptops should be touch screen, no excuse for anything else. Even my Dad who is a .NET enterprise programmer is constantly checking the Dell site to see when a touch screen version of his powerful Inspiron is available.

Yes Microsoft pushed touch on the "PC" before the market was ready. But in 5-10 years that's all people will want. Gesture, touch, and voice will be the primary input methods. Only hardcore users doing development, etc will stick with the mouse.

 

[spaulagain]

I agree with you on the fact that there is a lot of low-quality stuff. Dirt-cheap though. The problem is that the winning formula of Windows so far has been "I run on whatever device, same OS that you have at work, and hey you're so damn familiar with me". This is what made it so popular and what kept so many people from buying a Mac even if they had the money for one.

But, and read well here, they decided that this is Windows. Windows, you know? That OS with.. windows. And they called Windows 8. And it HAS to come pre-installed on whatever machine anybody puts on the market. Desktop PCs, notebooks, tablets, whatever. Not only that: but you have no choice. You buy a PC, you turn it on and bam! the tiles. No way to remove them. They HAVE to be there, even without a touch screen! A touch OS on non-touch PCs. Plus, let's remove the start button. They single-handedly decided that all traditional PCs must be screwed, with customers calling the call centers with the question "where the hell is the start button? And what are these freaking squares on the screen?".

I'm really getting tired of people acting as if Windows 8 is useless on the desktop with the tile interface. Its the dumbest argument ever. I use at home on my desktop and much prefer it over Windows 7. Large tiles are just as good for mouse as they are touch. The Start Menu was one of the most inefficient, tedious UIs in any OS. Scroll through cascading folders and carefully click the link to the app that's only 30px tall? Stupid.

They took Windows and optimized it for touch because they know that's what most people will be using in the coming years. Now they have an operating system that can run well on a tablet and be docked into a desktop for more advanced use. This isn't rocket science.

Once my current PC dies, I will replace it with a Surface Pro like tablet, and just dock it at my desk when I want to use large monitors and mouse. Then I can undock it, browse at the TV, or take to a meeting with a client and have all my design tools right there to show them the work. Its brilliant.

 

[Bicpug]

If the RT has been released at the price it's at now it would have flown off the shelves; now its a decent price but has to fight the negative press as a product that didn't sell well.
Touch screen will never be a mainstream desktop input system, it's exhausting to use a vertical touch screen for any length of time; the only way for MS to push its adoption is some form of touch pad surface.

 

[gilezzz]

I'm really getting tired of people acting as if Windows 8 is useless on the desktop with the tile interface. Its the dumbest argument ever. I use at home on my desktop and much prefer it over Windows 7. Large tiles are just as good for mouse as they are touch. The Start Menu was one of the most inefficient, tedious UIs in any OS. Scroll through cascading folders and carefully click the link to the app that's only 30px tall? Stupid.

Spaulagain, I definitely respect your opinion and the way you have embraced Windows 8. This thread is about the Microsoft loss on the Surface RT and the overall performance of the new devices and OS so far. I am just trying to explain the scarce success of Windows 8 according to my thoughts. And consumers can be dumb. The point is to sell them your thing.

I think that Windows 8 was pushed on traditional PCs and it just feels odd there. And (dumb) customers feel confused. More advanced users feel disappointed by the fact you cannot disable the metro interface if you don't want it. After all, if like you said the objective is to give flexibility, why not give choice? They are in fact going in this direction with 8.1. And because I think they have never been dumb, I feel they have been trying to be pushy in the initial release and then realized they had gone too far.

 

[spaulagain]

Spaulagain, I definitely respect your opinion and the way you have embraced Windows 8. This thread is about the Microsoft loss on the Surface RT and the overall performance of the new devices and OS so far. I am just trying to explain the scarce success of Windows 8 according to my thoughts. And consumers can be dumb. The point is to sell them your thing.

I think that Windows 8 was pushed on traditional PCs and it just feels odd there. And (dumb) customers feel confused. More advanced users feel disappointed by the fact you cannot disable the metro interface if you don't want it. After all, if like you said the objective is to give flexibility, why not give choice? They are in fact going in this direction with 8.1. And because I think they have never been dumb, I feel they have been trying to be pushy in the initial release and then realized they had gone too far.

Windows 8 sold 100 million licenses in the same time frame Windows 7 did on its release. Windows 7 was considered the best selling operating system. I'd hardly call that scarce success. iPad hit its 100 million mark several years after its release.

Yes, Windows 8 could have been released with a slightly softer push on the new direction. And that's exactly why MS is backing up a little bit.

But this idea that the release of Windows 8 and adjacent devices is some dismal failure is silly. I don't know how anyone could have expected the Surface RT to be some crazed hit that sold by the millions. That's just ridiculous.

And as noted above the supposed $900 million loss is not what it sounds like. Accounting has various approaches accommodate figures. Sometimes companies spread factors over multiple years, some take it out all in one quarter, etc.

 

[maroonedWP]

Well, you're making a great tablet with a "new" OS and people wants to buy it. Then you're looking somewhere to buy it and can't find any. After a little research you find Micosoft is not selling their own product in your country. Tech shops are filled with full of Samsung and Apple crap.

Later you're slashing the prices to sell the tablet and STILL not seeing the rest of the world.

Nokia can sell Lumias because when you buy a Nokia product you can use ALL of the services -music, apps, games from Nokia-. And you can find Nokia Shops all over the world.

Microsoft can't sell Surface RT because they are not selling it properly.

 

[spaulagain]

Well, you're making a great tablet with a "new" OS and people wants to buy it. Then you're looking somewhere to buy it and can't find any. After a little research you find Micosoft is not selling their own product in your country. Tech shops are filled with full of Samsung and Apple crap.

Later you're slashing the prices to sell the tablet and STILL not seeing the rest of the world.

Nokia can sell Lumias because when you buy a Nokia product you can use ALL of the services -music, apps, games from Nokia-. And you can find Nokia Shops all over the world.

Microsoft can't sell Surface RT because they are not selling it properly.

Exactly

 

[thecaringkind]

One thing that didn't help was Microsoft overestimating the demand and seriously overpricing the Surface RT. Confusing, uninformed marketing just made it that much worse. Those factors have a huge impact on sales overall. The product is good but MS kept shooting themselves in the foot trying to sell it. A $900 million write off is the result.

 

[inteller]

write down, not write off. Please go do some basic research and understand the difference.