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Surface RT tanks Microsoft's earnings

Mark Hachman | July 19, 2013
Microsoft reported its earnings for the June quarter on Thursday, and they were downright awful by Wall St. standards. The blame falls on Windows RT.

steve ballmer

Microsoft fell way short of analyst estimates for its fourth fiscal quarter, with revenues nearly a billion dollars short of what analysts had expected.

The culprit? Microsoft's Surface RT tablets. A lack of sales forced Microsoft to take a $900 million charge, in addition to a previously deferred $782 million charge related to Microsoft Office.

Sources close to Microsoft said that the charge reflects the recent pricing changes for Surface RT.

surface RT

Microsoft reported net income of $4.97 billion (59 cents) on revenue of $19.90 billion, nevertheless, which showed strong improvements from a year ago. The company reported a 10.1 percent increase in revenue from a year ago, when Microsoft reported a loss of $492 million. For the fiscal year, Microsoft reported net income of $26.86 billion on revenue of $77.85 billion.

Analysts polled by Yahoo Finance expected Microsoft to report an EPS of 75 cents per share, on revenue of $20.73 billion.

Microsoft has struggled to convince consumers to support its newly released Windows 8 operating system, but the company recently released a preview of Windows 8.1 as a "do-over" to win back customers. Win 8.1 has customer-friendly features that include the ability to boot directly to the desktop, as well as a "start button" that takes them back to a reorganized Windows Start Page.

Looking forward
Steve Ballmer, Microsoft's chief executive, took a forward-looking approach Thursday, pointing to the company's recent reorganization as a recipe for success.

"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," Ballmer said in a statement. "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."

In a study conducted by online advertising network Chitika, the share of North American web traffic from Windows 8 operating systems has grown to 4.8 percent, the company said Wednesday.

"Windows' hold on the continental desktop OS marketplace remains as strong as ever," Chitika said in a statement. "While this is certainly good news for Microsoft, it is tempered by the continued growth of mobile web browsing, where the company is not as strong, along with the more gradual slope of Windows 8 growth rate within North America."

"However, Microsoft's decision to make some changes to the recent Windows 8.1 update may spur more users to adopt the new OS, as the company has attempted to address some of the user concerns surrounding the initial version of the software."

 

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