Microsoft takes $900 million charge to write off Surface tablets


— 6:00 AM on July 19, 2013

It's financial reporting week this week, and you know what that means—lots of numbers, dollar signs, and quotations from Wall Street analysts.

The latest round of figures comes from Microsoft, which has reported results for the fourth quarter of its 2013 fiscal year. (That quarter ended on June 30.) Microsoft says both its revenue and profits grew sequentially and year-over-year. That sounds like cause for celebration, but apparently, the numbers fell well short of what analysts were expecting. Reuters quotes one Pacific Crest Securities analyst as saying, "That's the biggest miss we've ever seen from Microsoft, the biggest that I could remember."

Here are the quarterly results, first for the company as a whole, and then for each one of its business divisions:

  Q4 FY'12 Q3 FY'13 Q4 FY'13
Revenue $18.06 billion $20.49 billion $19.90 billion
Net income -$492 million $6.06 billion $4.97 billion

  Q4 FY'12 Q3 FY'13 Q4 FY'13
Windows
$4.15 billion $5.70 billion $4.44 billion
Server and Tools $5.09 billion $5.04 billion $5.50 billion
Online Services
$735 million $832 million $804 million
Microsoft Business
$6.29 billion $6.32 billion $7.21 billion
Entertainment and Devices
$1.78 billion $2.53 billion $1.92 billion

Microsoft seems to be doing better than last year across the board—especially in terms of net income. In the same quarter a year back, the company suffered its first-ever quarterly loss. The loss was due to a $6.19-billion charge related to Microsoft's acquisition of aQuantive, a digital marketing firm.

Speaking about the latest round of results, Microsoft CFO Amy Hood comments, "While our fourth quarter results were impacted by the decline in the PC market, we continue to see strong demand for our enterprise and cloud offerings." Hood says Microsoft has seen "increased consumer demand" for Office 365, Outlook.com, Skype, and Xbox Live.

One product clearly didn't see increased consumer demand: the Surface for Windows RT tablet. The Q4'FY13 results include a $900-million write-off related to "Surface RT inventory adjustments." No wonder Microsoft started selling the ill-fated device at a steep discount earlier this week.

Since this quarter happened to round out Microsoft's fiscal year, the company has also posted full-year financial numbers. Here they are:

  FY'12 FY'13
Revenue $73.72 billion $77.85 billion
Net income $16.98 billion $21.86 billion

  FY'12 FY'13
Windows
$18.40 billion $19.24 billion
Server and Tools $18.53 billion $20.28 billion
Online Services
$2.87 billion $3.20 billion
Microsoft Business
$24.11 billion $24.72 billion
Entertainment and Devices
$9.60 billion $10.17 billion

Yeah, considering the state of the PC industry nowadays, Microsoft could be doing a lot worse. Revenue is up compared to 2012 across all of the company's businesses, even if only slightly in the case of the Windows and Business divisions.

   
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