Microsoft has already taken a $900 million charge against inventory and pricing adjustments for its Surface tablet, and has now revealed that its revenue so far from the struggling product has been less than that – at $853 million.
Tablets, while appearing to offer the growth potential of a fairly virgin market, have actually proved a minefield for firms that don't get the design and user experience just right. RIM, which recently admitted it would not run BlackBerry 10 on its PlayBook, effectively orphaning the device, bears witness to this, as do Hewlett-Packard (several times over) and Dell.
Even Samsung took a while to get it right, and to come up with something really distinctive in the Note, while Nokia hasn't played at all. Even some tablet makers with fairly popular products, like Barnes & Noble, have foundered on the rocks of a poor business model.
For such a new sector, consolidation has come very quickly, partly because the devices are strictly luxuries, not must-haves like phones, so consumers will wait for the right experience to come along. For many, of course, this has been the iPad, while the Galaxies Tab and Note, the Google Nexus family and the Amazon Kindle Fire are the other success stories, along with a host of low cost, white label products.
It seems that Microsoft is falling on RIM's, rather than Apple's, side of the fence, especially with the ARM-based Windows RT offering that was meant to kickstart a new life for Windows outside of x86. But consumers remain unconvinced, and PC partners like Acer have been angry at the new competition from the OS vendor. Acer has been very negative about Windows RT and this week said it would not produce another tablet for the OS, focusing its efforts on the Intel-powered Windows 8 Pro.
Such decisions, mirrored by others like Samsung and HP, will please Intel, of course, keeping the old Wintel double act alive, but also Google, which sees little threat to Android on the ARM platform.
Although Microsoft has not disclosed sales unit figures for Surface, the revenue level suggests it has sold about 1.7 million units, which is in line with various analyst calculations. The $853 million of revenue equates to less than 5% of the total takings of the Windows division last year, despite the huge marketing budget put behind making the Surface RT a breakthrough launch.