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Did Microsoft Throw Surface RT Under the Bus?

When Microsoft reported its worst quarter in recent memory last week, the company took its medicine after investors drove down its share price 11.4 percent Friday. On the surface (no pun intended), the culprit was Microsoft's unexpected $900 million charge related to the price reduction of its Surface RT devices.

Indeed the write-down gave analysts and pundits the opportunity to point to the deep-rooted problems of the Surface RT, including weak retail distribution (which it has since broadened), uninspiring marketing and Microsoft's decision to price the devices on par with the iPad rather than lower than its competition.

But there's another reason Microsoft took its medicine last week -- the company missed expectations across all its business units, including Server and Tools and the Microsoft Business Division (aka Office). "It was discouraging to read down the table and see that every division was below expectations," longtime Microsoft watcher Rick Sherlund, Nomura Securities analyst wrote in a research note.

On the other hand, many viewed the Microsoft Surface RT write-down as a tacit admission that it didn't have an iPad killer on its hands. Of course that reality set in long ago. Does that mean Surface RT and its sibling the Surface Pro are dismal failures? I believe it's way too early to write it off, so to speak. Microsoft appears to have cut its losses on its earlier mistakes, while clearing the decks for the next crop of Surface devices.

Presuming the next Surface RT and Surface Pros tablets are vast improvements, and the number of mainstream apps steadily increases, Microsoft is still in the game. It's not clear whether a Surface "Mini' is in the works but I think many would welcome such a device. Indeed some of the new devices offered by OEM partners give a sense of what's in the pipeline.

I stopped by the Microsoft Store over the weekend and spent some time with the Acer Iconia, an 8-inch Windows 8-based tablet powered with an Intel Atom processor as well as another new arrival, the 10.1-inch ASUS VivoTab Smart Tablet, priced at $399. Sporting a 64-GB SSD, 2 GB of RAM and a copy of Microsoft Office 2013 Home and Student, the ASUS device weighs 1.28 pounds and has run time of 9.5 hours on a charge. It's certainly more affordable than the Surface Pro and appears to have a better battery life.

Just as Microsoft is working to release faster updates to Windows, the company and its partners need to do the same with its devices. The sooner the better.



Posted by Jeffrey Schwartz on 07/22/2013 at 1:15 PM


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