Microsoft reports $900M hit on poor Surface RT sales

Microsoft Corp. today reported that it is taking a $900 million charge due the disappointing sales of its Surface RT tablet device.

In its earning release for the fourth quarter of 2013, the company reported revenues of $19.90 billion. Operating income was $6.07 billion, net income was $4.97 billion and diluted earnings per share at $0.59 per share.

For its fiscal year 2013, Microsoft’s revenue, operating income and diluted earnings per share were $77.85 billion, $26.76 billion and $2.58 per share respectively.

“The financial results include a $900 million charge, or $0.07 per share impact, related to Surface RT inventory adjustments,” a statement from Microsoft said.

The results also include a the recognition of $540 million in previously deferred revenue related to the company’s Windows upgrade offer as well as a $733 million expense related to a European Commission fine.

Microsoft’s Surface RT tablet has been plagued by Wi-Fi connectivity problems which caused the company to issue at least three upgrades to the device which was just released last year.

Although Microsoft claimed earlier this year that is sold more than 1.5 million Surface RT devices and about 400,000 Surface Pro tablets, some analyst said the company erred in confusing customers by offering separate touch focused operating systems the Windows RT and Windows 8.


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Recently the company cut the price of each Surface RT model by $150.

“While our fourth quarter results were impacted by the decline in the PC market, we continue to see strong demand for our enterprise and cloud offerings, resulting in record unearned revenue balance this year,” said Amy Hood, chief financial officer for Microsoft. “We also saw increasing consumer demand for services like Office 365,, Skype and Xbox LIVE.”

Microsoft CEO Steve Ballmer, earlier this week announced a major reorganization of the company and announced that Microsoft realign to shift its focus new products on as well as cloud services and its data centre business.

Despite its Surface RT write off, Microsoft is not throwing in the towel on tablet devices.

“We are working hard to deliver compelling new devices and high value experiences from Microsoft and our partners in the coming months, including new windows 8.1 tablets and PC’s,” said Ballmer in a statement today.



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