On the Surface, Microsoft’s massive $US900 million tablet inventory writedown is a disaster

Microsoft has announced a massive $US900 million writedown on the value of unsold Surface tablets.

The $US900 million charge relates to unsold inventory of the consumer version of its Surface tablet, which uses an ARM processor rather than an x86-processor from Intel and runs a special version of its operating system, known as Windows RT.

The inventory writedown comes less than a week after Microsoft announced a large price cut of $US150 for the struggling product line.

The Surface managed to sell just 900,000 during each of its first two quarters on the market, representing less than 1.8% of the market.

In Australia, weak sales of the Microsoft Surface have seen Windows claim just 8% of the local tablet market, compared to 56% for Apple’s iOS and 26% for Google Android devices, including Samsung.

Aside from the weak sales figures, Microsoft’s entry into the hardware market has strained relationships with several key hardware partners.

As SmartCompany reported last year, senior Acer executives, including president Jim Wong, warned Microsoft its decision to release its own tablets would impact its Windows device strategy.

“Originally we had a very aggressive plan to come out [with a Windows RT tablet] very early [in 2013],” Wong said in October last year.

“But because of Surface … we are much more cautious. Originally our plan was the first quarter, but now I don’t think it will be earlier than the second quarter.”

Wong’s comments were echoed at the time by other senior executives at the company.

“We have said [to Microsoft] think it over. Think twice. It will create a huge negative impact for the ecosystem and other brands may take a negative reaction. It is not something you are good at, so please think twice,” chairman JT Wang said.

“If Microsoft … is going to do hardware business, what should we do? Should we still rely on Microsoft, or should we find other alternatives?” Acer’s president of personal computer global operations, Campbell Kan, said.


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