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Man the lifeboats! The Surface RTitanic is sinking fast

Mark Hachman | July 22, 2013
Microsoft's message seems to be: yes, while our low-end Surface RT tablet stinks, it doesn't stink as much as it used to. Meanwhile, as many as 6 million Surface RTs sit idle.

As dynamic, productive, and exciting has Microsoft has tried to make the Surface RT tablet out to be, consumers can't shake the perception that it's just a bland bit of overpriced plastic—all its VaporMg cladding notwithstanding—that can do little more than surf the Web.

Unfair? Maybe so. But as Wall Street digests that distasteful reality, so too should Microsoft's marketing department. In fact, it's eventually going to realize that as painful as the price cuts on the Surface RT have gone, they didn't go nearly far enough.

Microsoft reported fourth-quarter revenues Thursday that came in nearly a billion dollars less than what analysts expected, thanks to a $900 million writedown of the Surface RT tablet. Amy "Red Riding" Hood, Microsoft's new chief financial officer, was seemingly thrown to Wall Street's wolves, as chief executive Steve Ballmer and other chief executives were absent from the call —unlike the packed house that accompanied the "One Microsoft" reorganization. To Hood's credit, she dodged nimbly, scattering bland crumbs of data that the analysts meekly accepted.

It shouldn't be too hard to figure out how many Surface RT tablets the writedown represented: $900 million divided by the per-unit price cuts—equating to $150 for each version of the Surface RT—will equal the number of Surface RT tablets sitting idle on Microsoft's shelves, said Patrick Moorhead of Moor Insights and Strategy.

The grand total? Slightly less than 6 million Surface RT tablets, according to the math.

That's a mind-boggling number where the Surface is concerned. In May, IDC estimated that Microsoft sold 900,000 Surface tablets during the first quarter of 2013, including the Surface Pro. During the fourth quarter, IDC reported that Microsoft shipped—not sold—another 900,000 Surface RT tablets. And that's it. That's the sum total of what Microsoft has sold so far: probably a bit less than 1.8 million Surface tablets, in total. In other words, that's more than a year and a half of Surface RT inventory that Microsoft has on its shelves.

Shortly before the call started, PCWorld was told that the Surface RT wasn't dead, a position Hood backed up: "[W]e believe this pricing adjustment will accelerate Surface RT adoption and position us better for long-term success," she told analysts.

Well, it damn well better. So far, Microsoft isn't giving up. But if Microsoft doesn't watch out, the Surface RT may find itself sitting next to the HP TouchPad in the dustbin of history.

Lessons from the HP TouchPad
 
HP touchpad

And there's the rub. In March of 2011, Hewlett-Packard revealed WebOS, an arguably elegant OS that featured a suite of basic apps, limited third-party support, and the ability to connect to the Web. Sound familiar?

 

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