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Microsoft financials show Surface RT write-down of $900 million

by Mark Tyson on 19 July 2013, 09:15

Tags: Microsoft (NASDAQ:MSFT), Nokia (NYSE:NOK)

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Microsoft has just reported its quarterly and full year financial results. For Microsoft this is the end of the fourth financial quarter. The headline figures from the financials are; quarterly revenue of $19.9 billion with an operating profit of just over $6 billion. Microsoft also surprised investors by including a $900 million write-down to pay for the Surface RT misadventure.

Surface RT: Microsoft may have six million devices left unsold

Right up there in the first paragraph of its latest financial report Microsoft writes "These financial results include a $900 million charge, or a $0.07 per share impact, related to Surface RT inventory adjustments." This write-down is a result of the company misestimating the market performance of the Surface RT. It is the result of errors in judgement concerning how popular the Surface RT would be at a price which would make it a profitable product for Microsoft.

Microsoft won't say how many Surface RT tablets it has made and is still sitting upon. Mary Jo Foley, writing for CNet, calculates that the figure could be as many as six million. In her article she puts forwards lots of "what ifs" about how Microsoft could have done things differently. However in talks with Brian Hall, the General Manager of Surface Marketing, she was told "Microsoft is 100 percent committed to Surface RT and Windows RT going forward and has no plans to drop work on either product".

Other Microsoft results

The declining PC market also negatively impacted the firth quarter results but "strong demand for our enterprise and cloud offerings" contributed positively to the balance sheet. Amy Hood, chief financial officer at Microsoft, said that she saw "increasing consumer demand for services like Office 365, Outlook.com, Skype, and Xbox LIVE".

Steve Ballmer is still talking about Microsoft as a devices and services company. He said that the company will continue to "focus our energy and resources on creating a family of devices and services for individuals and businesses that empower people around the globe at home, at work and on the go, for the activities they value the most".

To see how the various Microsoft business divisions contributed to the overall business revenue and income please consult the table below.

Meanwhile over at Nokia

Yesterday Nokia also announced its quarterly financials. The Finnish company generated revenue of $7.4 billion, down from $9.2 billion a year ago. The firm made a loss of $150 million during the quarter.

However looking at the bright side of things, Nokia sold 7.4 million Lumia smartphones during its Q2 period, a good increase on the 5.6 million sold in the previous quarter and 4.4 million the quarter before that - an encouraging trend. Windows Phone has now overtaken BlackBerry as the third placed mobile platform.



HEXUS Forums :: 18 Comments

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What's shocking is that they didn't see that coming and launched the product anyway.
They need to do an Atom based X86 one without office for about £200 tablet only and £250 keyboard inclusive. The ARM based ones are pointless for almost everyone.
Nokia sold 7.4 million Lumias....Apple sold 37 million iPhones.

Still happy Nokia? I wouldn't be. How many smartphones did Samsung sell? About 10 times your figure Nokia....

Microsoft - yup nothing to add other than too little too late and too expensive
wasabi
They need to do an Atom based X86 one without office for about £200 tablet only and £250 keyboard inclusive. The ARM based ones are pointless for almost everyone.

Basically a cheap Surface Pro. I totally agree and seriously ask the question who thought and continues to think RT was a worthwhile investment...
Scribe
What's shocking is that they didn't see that coming and launched the product anyway.


They didn't realize that the Apple sheep are, in fact, APPLE sheep. Other people are not willing to pay nearly half a grand for a tablet.