Published On: Sat, Jul 20th, 2013

Shares of Microsoft fell 11% on Friday

Microsoft Building

Microsoft Building

Microsoft took a big write-down on its highly touted but poorly adopted Surface tablet last quarter, causing the company to badly miss Wall Street analysts’ profit expectations.

Results were negatively impacted by a whopping $900 million write-off of Microsoft’s Surface RT inventory. Microsoft recently knocked $150 off the price of the tablet, which debuted in October and initially sold for $500. It is the first PC designed by Microsoft, but the company says its own devices will become a big part of the company’s strategy going forward.

Microsoft hasn’t helped its cause by failing to properly explain what differentiates Windows RT from Windows 8. As a result, hardware makers have largely settled on Intel-based hybrid devices that are neither great tablets, nor great PCs, which hurts Microsoft’s Windows strategy.

Lenovo, Samsung and others have since stopped producing RT devices. Acer, for example, recently released the first eight-inch Windows tablet opting to use Windows 8 instead of the RT platform — a stinging blow to Microsoft’s RT hopes.

Microsoft is placing most of the blame for its performance on slumping PC sales, but is still encouraged by business from its corporate customers and results from many of its services.

Microsoft says its Office 365 service is growing at a satisfactory rate with 1.5 million subscribers and expects Office to be successful in the long term.

The stock finished at $31.40, off $4.04 for the day. The percentage decline — which wiped out more than $32 billion in stockholder value — was the biggest slide in Microsoft’s stock since the year 2000. More than 245 million shares traded hands compared with the 90-day average trading volume of 50 million.

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