Surface RT: Writing down Microsoft
Microsoft has been in mobile since Windows CE for PDAs in 1998. Inspite of 15 yrs of presence, the latest reports don’t inspire any much confidence at Microsoft writes down huge losses on its ambitious Surface RT tablets
1. Microsoft’s Surface tablet generated $853million revenues in 8 month period (Launched late October 2012 to End of Q2, 2013). However, Microsoft has written off $900 on the Surface line – thus re-iterating that the whole premium pricing strategy was to no vain.
a. To put the $853 million in perspective, Surface revenue equaled about 5.5% of the Windows Division’s $16 billion in sales in the last three quarters, and just 3.3% of the $25.8 billion that Apple’s iPad generated in the same period.
2. Microsoft cut the price of Surface RT by as much as 30% in July 2013 and given that the number for the $899 Surface Pro have been poorer, there could be another inventory write down of Surface Pro over the next few quarters
3. Surface RT has also seen a huge attrition of OEMs which starts with HP & Toshiba (Committed to Surface RT- but never launched a device), Samsung (Which cited lack of demand for ditching the platform in January 2013), Acer, Lenovo and Asus (Mid July 2013).
a. There may be a few backers in terms of Qualcomm, Nvidia and Dell – But the fact remains – Windows RT is challenged and OEMs are simply not interested in RT.
b. This could be a spanner in the works of Windows RT 8.1 – It already is out of all momentum.
4. Microsoft has the choice of continuing on the Surface RT Tablets – but it is very highly unlikely that they would be able to turn the platform around. Keeping Surface RT alive would be a game of diminishing returns and would bleed Microsoft.
Microsoft may have deep pockets – but that really doesnot justify the undying faith on Windows RT.