Market Overview

Surface Revenue Falls Below Microsoft's $900 Million Write-Down (MSFT)

Unsold inventory for Microsoft's (NASDAQ: AAPL) Surface RT tablet recently led to a write-down totaling $900 million.

That number turned out to be greater than the amount of revenue earned on the entire Surface product line.

According to GeekWire, total Surface revenue reached $853 million on June 30, 2013.

While Microsoft has not said how many tablets it has sold since October 2012, AllThingsD believes that the rumors (which claim 1.5 million to 1.7 million units were sold) might be accurate.

Related: Microsoft to Ship One Million Surface Pro Units

If those figures are correct, Microsoft's tablet might fall within the range of Barnes & Noble's (NYSE: BKS) Nook series, which was more or less discontinued when the company decided to exit the tablet industry. The ailing bookseller plans to work with partners to produce future tablets, so it is not backing away from the business entirely.

Microsoft could have turned to a partner to produce Surface, but the company reportedly believed that it could make the best device in-house. Even if that were true, consumers did not seem to be receptive to the $500 MSRP that accompanied Surface RT at launch.

When it was released last October, Surface suffered from a lack of clarity. While the TV advertisements may have been fun and lighthearted, the initial batch of commercials focused on the device's ability to click into the colorful Touch Covers. The actual features -- things that Apple (NASDAQ: AAPL) has successfully used to promote the iPad -- were mysteriously absent from these ads.

On top of that, Surface launched as a Microsoft store exclusive. Consumers could purchase one online, but few techies are interested in taking home a new gadget without a proper test drive. This gave the iPad -- which can be demoed in hundreds of Apple stores and most Best Buy (NYSE: BBY) locations -- another advantage.

When Surface finally came to Best Buy, the hype for it and Windows 8 had already died down. Any sales that could have been gained by that momentum were lost in the process.

Critics argue that the $349 price reduction will give Microsoft a sales boost.

According to ZDNet, that boost may have already occurred. The popular tech publication pointed to a Walmart.com (NYSE: WMT) listing for the device with or without a Touch Cover. Both were sold out on July 29.

As of this writing, the 32GB and 32GB with Touch Cover models are still sold out. Consumers can purchase the 64GB model with a Touch Cover for $549, however, as well as various Surface Pro tablets.

Louis Bedigian is the Senior Tech Analyst and Features Writer of Benzinga. You can reach him at 248-636-1322 or louis(at)benzingapro(dot)com. Follow him @LouisBedigianBZ

Posted-In: AllThingsD GeekWire Microsoft Surface Surface ProEarnings News Tech Best of Benzinga

 

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