Microsoft profit misses as Surface tablets languish; shares drop
By Bill Rigby
SEATTLE (Reuters) - Microsoft Corp on Thursday reported lower-than-expected quarterly earnings as slow personal computer sales ate into its Windows business and the company took an unexpected $900 million charge for its inventory of unsold Surface tablets.
The stock fell 5 percent after hours from 5-year highs.
The massive charge underlines the struggles of the world's largest software company, which last week announced a deep reorganization to transform itself into a "devices and services" leader, but is struggling to make mobile computing as attractive as Apple Inc or Google Inc.
"That's the biggest miss we've ever seen from Microsoft, the biggest that I could remember," said Brendan Barnicle, an analyst at Pacific Crest Securities. "It looks like everything was weak."
Before the sell-off late Thursday, Microsoft shares had risen 32 percent this year, beating a 19 percent rise in the Standard & Poor's 500 index.
Microsoft said the $900 million charge was related to its Surface RT tablet, the version of its tablet running on ARM Holdings-designed chips. The Surface was meant to challenge Apple's iPad when it was launched alongside Windows 8 in October, but has not sold well.
Earlier this week, Microsoft said it was drastically cutting prices and expanding distribution of the model to entice buyers, reducing the value of Surface devices in its inventory.
"We do know we have to do better, particular in mobile devices," Amy Hood, Microsoft's new chief financial officer, said in a telephone interview. "That's a big reason we made the strategic organizational changes last week." Continued...