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Microsoft incurs $900m costs due to poor Surface RT sales

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Microsoft Surface
Microsoft Surface

Microsoft will incur a $900 million charge on its Q2 2013 results due to a mass of Surface RT tablets lying unsold in its inventory.

Launched in June 2012, the Surface RT has turned out to be a very expensive gamble for Microsoft, as the software company has been penalised to the tune of $900 million (£591 million) for unsold inventory.

Although Microsoft hasn’t released actual figures for Surface RT sales, estimates suggest only around 1 million of the Surface tablet range has been sold. Only 260,000 is said to be for the Surface RT which runs Windows RT and is incompatible with any older Microsoft software.

It is estimated that around 750,000 Surface Pro tablets have made their way into consumer hands, but that still isn’t a very encouraging figure for Microsoft’s first foray into hardware. Putting it into perspective those figures equate to around 2 per cent of the entire tablet market.
 
“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 PCs”, said Steve Ballmer, Microsoft CEO, as part of the earnings call.

Windows sales are falling due to the poor demand for desktops and laptops, revealed by the recent revealed that PC sales have declined for the fifth quarter in a row.  

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

Microsoft’s Online Services Division grew 9 per cent in revenue for the quarter, Entertianment and Devices Division increased by 6 per cent and the Server & Tools revenue grew 9 per cent.

Xbox Live alone grew nearly 20 per cent in revenue, supported by the announcement of the Xbox One.

Overall, Microsoft’s revenues grew by 11 per cent to $19.9 billion (£13 billion) and its operating income was reported as $6.1 billion (£3.99 billion), which is down 5 per cent from the same period last year.

Next, read our pick of the best Windows 8 laptops, tablets, convertibles and PCs.


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