Microsoft recorded a $900 million charge against its fourth-quarter earnings for “inventory adjustments” on its Surface RT tablet. Does that mean that the Surface RT is dead? No, a source close to the company told PCWorld.
Instead, Microsoft expects that the recent price cuts, when it lowered the price of the Surface RT by 30 percent, to have a positive impact on the tablet, the source said. (The entry-level 32GB Surface RT model now sells for $349; the 32GB device, for $499; and the 64GB configuration is priced at $599.) The $900 million charge reflects the financial impact of those price cuts, the source said. Typically, when a price cut occurs, it spurs demand; Microsoft hopes that the same trend will occur with the Surface RT.
Analysts say Microsoft’s moves are indicative of Windows RT’s value to the company. “For Microsoft, Windows RT is a long-term, strategic play,” Patrick Moorhead, founder and principal analyst of Moor Insights and Strategy, said recently, explaining why Microsoft’s Surface RT tablet is so critical to the company’s future. Moorhead characterized the Surface RT, which ran on ARM processors, as a wakeup call for Intel and its own low-power Atom architecture.
Intel heard that call, Moorhead said, and with the upcoming “Silvermont” Atom architecture, the chip maker is expected to challenge ARM. While Microsoft is expected to refresh the Surface RT at some point, it’s not clear whether the company will select Intel’s Atom—which runs Windows 8 and Google’s Android OS, as well as Windows RT.
For now, however, it appears that Microsoft views the Surface RT as a viable platform. Microsoft recently expanded its Surface penetration into a total of 29 markets. Within the United States, a partnership with Best Buy will put the Surface—and Windows Phone, and Windows 8—in front of every shopper that visits the store.
Microsoft chief executive Steve Ballmer and other Microsoft executives will answer questions about the Surface RT, Windows 8, and other Microsoft products in a conference call with analysts Thursday afternoon.
Additional reporting by Brad Chacos.