Microsoft has made its latest financial statement, and in doing so finally publicly admitted just now badly it misjudged demand for its Surface RT tablet line.
Microsoft has confessed to a significant overestimation of Surface RT demand, taking a $900 million write-down on unsold inventory.
In the company's most recent earnings call, it admitted that it has had to make a $900 million write-down for unsold inventory of its ARM-based Surface RT tablet devices - reflected in the recent dropping in price of the devices by nearly a third. While Microsoft has made no official sales figures for the tablets public, it is believed to be holding onto considerable excess inventory - and with a replacement rumoured to be just around the corner, that's not an ideal place to be.
Other figures in the company's earnings report, which covers the fourth quarter of its latest financial year, made for easier reading: the company ended the quarter on $19.9 billion in revenue, up from $18.1 billion for the same period last year. That rise, Microsoft explained, was helped by a significant boost in its Office 365 subscriber base, along with a 9 per cent year-on-year growth in the Server and Tools division.
An area that didn't show growth should come as no surprise: Microsoft's Windows Division reported a six per cent dip in revenue for the quarter, ending the year on a 1 per cent drop over the last financial year. With Microsoft having launched its latest-generation operating system, Windows 8, that's not something the company would have hoped to report - and a clear indicator that there's something in the claimed shrinking of the traditional PC market. Gaming, however, is on a boom, with Xbox Live revenue jumping 20 per cent in the quarter.
'While our fourth quarter results were impacted by the decline in the PC market, we continue to see strong demand for our enterprise and cloud offerings, resulting in a record unearned revenue balance this quarter,
' claimed Microsoft's chief financial officer Amy Hood during the call. 'We also saw increasing consumer demand for services like Office 365, Outlook.com, Skype, and Xbox LIVE. While we have work ahead of us, we are making the focused investments needed to deliver on long-term growth opportunities like cloud services.
'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,
' added chief executive Steve Ballmer, the man at the head of a major shake-up that puts him directly at the centre of all its various divisions. 'Our new products and the strategic realignment we announced last week position us well for long-term success, as we 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.
For the full financial year, Microsoft's report showed $26.76 billion profits on $77.85 billion in revenue - helped by a delayed $782 million in revenue from the Office upgrade offer the company ran last year. Clearly, then, the company is hardly hurting - but investors are still anty over the figures, with Microsoft's share price dropping over seven per cent since the report was made.