Record earnings result in an 11% drop in stock price…seriously?

There is a technology company that reported a ten percent rise in sales, earnings of five billion dollars or 59 cents a share and totals sales of $20.7 billion(US).  Yet, despite these great numbers, its stock sank 11% on the news.

What company? Microsoft. Why? Because they reported a $900 million write down on the Windows RT version of Surface. NOT the Pro Surface, which has been deemed a failure because it is lumped in with RT.  Indeed, the RT Surface is hardly a failure either. The write down is from where Microsoft lowered the device’s price by as much as $150 each.  Now, don’t get me wrong, Surface RT is not taking the retail market by storm. Far from it.  It is not selling all that well. There are a variety of reasons why, but, the biggest reason…it’s initial price was just too damn high.  $499 for an RT tablet is way too much.  Yes, it is a terrific device. Nice display, cool design, good feel and all around very nice hardware. BUT. There’s always a but.  Windows RT simply isn’t mature enough to command that kind of price. Microsoft needed to take a loss up front to get the machines out in the public hands.

Armchair quarterbacking aside, Microsoft has recognized what it did wrong and is making the necessary changes to right the ship. I think they will and I don’t think Ballmer’s head needs to roll. Yes, he should have realized they are not Apple and Surface RT is not the iPad. However, it is close now and lowering the price to $349 is a big step in the right direction.

The news was not all bad for the company. Office sales were up, Windows was steady and Windows Phone 8 is making big strides. In fact, Nokia reported selling more Lumia Windows Phone devices than Blackberry sold in its entire lineup.  Though, given that Apple moved 30 million iPhones compared to Nokia’s 7.5 million Lumias and one quickly realizes just how bad Blackberry is doing and also begs the question about Nokia as well.

Windows 8 devices, overall, are doing well, but not nearly as well as they could be.  The press is partly to blame and Microsoft is partly to blame but, the biggest offenders? The hardware partners. Mediocre hardware is killing the Windows devices market.  There are standouts, but, generally speaking, the state of the hardware is abysmal. You have a dynamite operating system that works equally well with touch and non-touch devices and, yet, the hardware is barely adequate for Windows XP. And these little 8 inch ‘saviour’ tablets? They will do more harm. Witness the poorly received Acer W3 8 inch tablet. The screen has been vilified. It is so bad that even Acer admits they need to do something about it. Question is what and when. In the mean, this overpriced tablet is leaving a bad taste in customer’s mouths. 

And, eight inches? Seriously? As long as that damned desktop mode is in Windows, you cannot have a touch screen under ten inches and be usable. Hell, I can barely use it at 10.6 inches.  I can’t imaging using it on an 8 inch screen.

The funeral that many are calling for is very premature. Microsoft will get it right.  They still have a huge advantage, contrary to what others may write, in Windows. Tablets, while handy, are not the end all and be all of computers.  I love them, but, we will still need our desktops. One day, that many not be the case, but, for the foreseeable future, it is.

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