Microsoft had a BlackBerry moment this quarter as it had to write of $900 million related to its Surface RT tablets. The Surface tablet project was a closely held secret that no one had a clue about its existence till Microsoft announced it at a special event in LA last year. It was so secretive that even Microsoft’s hardware partners were caught off guard and became suspicious about Microsoft’s intentions as it would then compete with their own laptops and tablets running Microsoft’s Windows RT.
However, Windows RT failed to take off as users found the performance sluggish and features crippled as it wasn’t compatible with any legacy software. Microsoft’s hardware vendors too took a hit and many have now decided not to launch any Windows RT devices. Microsoft recently made drastic cuts to the Surface prices in the US and elsewhere, which reminds us of similar price cuts BlackBerry (then RIM) did for the PlayBook tablet.
Microsoft’s quarterly result also points at weak demand for Windows 8 and the resulting revenue drop in its operating system software unit. The dismal earnings were preceded by an overhaul of the company’s top brass last week in accordance with Steve Ballmer’s vision of making Microsoft a “device and software” company.
It remains to be seen how Microsoft performs under the new vision considering its Surface effort hasn’t taken off and the company had a major PR fail moment with the Xbox One last month. These are not exactly encouraging signs if Ballmer is pivoting the company into an integrated hardware and software future.