Microsoft's Surface Struggles

Microsoft reported a 6% decline in revenues in its Windows Division, on a like-for-like basis, to 4.41 billion US dollars in the quarter ending June 30th. It said: "Increased commercial sales of Windows were largely offset by the impact on revenue of a decline in the x86 PC market."

Microsoft also reported that the Windows Division's operating income fell 1.3 billion dollars, "primarily reflecting product costs associated with Surface and Windows 8, including the charge for Surface RT [Microsoft's tablet computer] inventory adjustments of approximately 900 million dollars. Sales and marketing expenses increased 344 million dollars, reflecting advertising costs associated with Windows 8 and Surface." 

Amy Hood, CFO of Microsoft, said: "We reduced the price of Surface RT by 150 dollars to 349 dollars per device. As a result of this price change, as well as inventory adjustments for related parts and accessories, we recorded a 900 million dollars charge to our income statement.....we believe this pricing adjustment will accelerate Surface RT adoption and position us better for long-term success." source: Microsoft statement