Microsoft suffers $900m writedown on Surface RT as Q2 results disappoint

Software division carries ailing hardware as company falls short of predictions

Microsoft's quarterly results have delivered a $900m (£591m) inventory writedown on its Surface RT tablet hardware stock, and only an 11 per cent company revenue growth.

Compared to Q2 in 2012, this is a reduction of five per cent in revenues.

The $77.8bn total that Microsoft brought in missed the mark, coming in a full $1bn behind what analysts were expecting.

An expected earning of $0.75 per share actually manifested as $0.59 per share in the results, and a $4.97bn overall profit.

Microsoft revealed that its total earnings were boosted by "$540m of previously deferred revenue related to the Windows Upgrade Offer", but a further $733m expense "related to the European Commission fine" was another addition to the RT writedown.

Microsoft's share prices have already dropped seven per cent since the results appeared, and the news about Surface RT could well mark the death knell for the ARM-powered hybrid tablet device, which, though Microsoft has never released figures, has been estimated to have sold only 260,000 units since its November 2012 launch.

The Surface Pro, which can run legacy Windows programs, is itself only estimated to have sold 750,000 units.

The writing was on the wall for these Q2 Surface RT results for a while, with Microsoft both slashing the price of the machine at retail and offering it at a budget price for the education sector.

Further, Microsoft's recent aggressive push for the Surface Pro through retail channel resellers seemed another admission that the hardware department of Microsoft was finding difficulty.

However, Microsoft's software division is keeping the company afloat, with an impressive growth of 14 per cent in the Business Division and nine per cent in both online services and server and tools.

The Windows Division, despite continued enterprise resistance to Windows 8 and its flagging app ecosystem, still grew six per cent, and entertainment and devices grew by a steady eight per cent too, with a transaction revenue for the Xbox Live platform growing by "nearly 20 per cent", said Microsoft.