Microsoft's $900 Million Charge For The Surface RT Is Embarrassing, But It Was Still The Right Decision For The Company
It reinforces a bad historical pattern of Microsoft struggling with hardware products. The Xbox took a long time to be profitable. The Zune was a failure. The Kin phones were a disaster.
Yet, despite the bad history with hardware, Microsoft's decision to make the Surface was absolutely the right decision.
Microsoft needed the Surface because the iPad was (and still is) quickly taking over the personal computing world.
Its hardware partners showed no inclination to produce a high quality piece of hardware running Windows software that would compete with the iPad.
Microsoft wanted to halt the rise of the the iPad with Windows 8, which is supposed to be a combo of tablet and traditional PC software. To showcase Windows 8, Microsoft needed one good piece of hardware with a solid brand.
Companies like Dell, HP, Lenovo, etc. were not building good Windows branded devices. They weren't putting their resources into good hardware the was on Apple's level. And they could not be trusted to create good new products for Windows 8.
Therefore, Microsoft had to make the Surface.
Reviews of the hardware were largely positive.
"I like it," said Walt Mossberg in his review of the Surface RT. "It’s a unique tablet, made of a type of magnesium with a feeling of quality and care."
David Pogue at the New York Times raved about the "spectacular" hardware design of the Surface RT.
Where Microsoft's Surface failed was in the software department.
Windows 8 isn't good. It's the wrong path for tablet computing.
Microsoft tried to cram a full-blown PC on a tablet. The result was a half-baked experience that didn't make anyone happy. As Matt Rosoff of CITE World said, "Microsoft was wrong: tablets aren't PCs."
Microsoft has other issues, too. Its Windows Phone line has failed to catch on. The transition from iPhone to iPad has been natural, Microsoft would have benefited from something like it. Microsoft's marketing for the Surface was bad with goofy dancing ads. And its brand with consumers isn't strong.
Add it all up, and the result is Microsoft slashing the price of the Surface RT and taking a $900 million charge.
The charge is due to Microsoft cutting the price of the Surface to $350, down from $500. It has to account for the new price of the Surface inventory, plus other Surface related products and prices.
Microsoft says it remains committed to the Surface. It should release an updated version of the Surface this fall with new Intel chips that make it thinner with better battery life.
It's not giving up on the Surface, because it's the right idea. It needs a good piece of hardware for Windows 8. It needs to fix Windows 8, though, if it wants the Surface to sell.