Microsoft increases revenue in Q4, earns $4.97 billion, but the Surface ends up costing it $900 million.
By all means Microsoft had a healthy quarter in Q4. The company posted 10 percent more revenue than the same quarter last year — $19.90 billion — and posted a healthy profit of $4.97 billion.
But its ill-fated Surface ended up costing the company a fair amount of money. Due to “inventory adjustments” of the Surface, Microsoft took a hit of $900 million. Because of Microsoft’s accounting and where the Surface falls under, this money will come out of the total Windows revenue.
In response to lagging Surface sales, Microsoft cut the price of the tablet by $150. CFO Amy Hood said during an investor’s call that this will “accelerate Surface RT adoption and position us for better success.”
Microsoft didn’t elaborate on the sales numbers of Windows 8 tablets manufactured by third party OEMs.
By all means trying to expand the Windows ecosystem on to the growing ARM chipset. But the problem with the Windows Surface was that it was an unspectacular tablet in a very crowded marketplace.
The device launched without a solid library of apps, making its Windows app store look absolutely miniscule when compared to the Apple app store or the Google Play store. That combined with the fact that regular Windows apps wouldn’t work on the ARM chipset, because of the different instruction set, meant the Surface didn’t have much of a competitive advantage.
Should the Surface be refreshed, and either ship with a virtual machine or, better yet, a fanless x86 chip from Intel, it might have a fighting chance on the market. Without those changes, the Surface won’t increase its market share and will be destined for obscurity and another disappointing amendment to a Microsoft earnings report.