Microsoft Misses, Takes a $900 Million Charge on Surface RT Stock

Published on July 18, 2013
by John Paczkowski

arrows missing targetWall Street expected Microsoft to post a slight gain in earnings for its fiscal fourth quarter, but that’s hardly what it delivered.

Posting financials Thursday afternoon, Microsoft reported fiscal second-quarter earnings of 59 cents a share on $19.9 billion in revenue. That’s a 10 percent increase from the same quarter last year, but it fell well short of the 75 cents a share on $21.6 billion in revenue analysts had been expecting.

A stumbling miss that includes a $900 million charge thanks to Surface RT inventory adjustments. That write-down, which is evidently driven by the Surface RT price reduction Microsoft announced earlier this week is worth $0.07 per share. Accounting for that, earnings per share are 66 cents, which is still far below expectations.

Bad news, for which Microsoft is already paying dearly. The company’s shares are trading down 4 percent as I write this.

Breaking Microsoft’s earnings down by division: The company’s Windows unit posted revenue of $4.4 billion, a six percent increase from the prior-year period; its Business unit, which includes Office, posted revenue of $7.2 billion, an increase of 14 percent; and its Entertainment and Devices Division recorded $1.9 billion in revenue, a 7.5 percent increase from the same period last year.

The revelation of Microsoft’s lousy fourth-quarter performance follows the announcement of a massive reorganization of the company by CEO Steve Ballmer last week. That “far-reaching realignment” is intended to enable the company to “innovate with greater speed, efficiency and capability” — something that will obviously come in handy, given today’s news.

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