Microsoft shares hit by poor sales of Surface tablets and €900m writedown

Friday 19 July 2013 17.26
Microsoft has cut prices on Surface tablets as sales failed to meet expectations
Microsoft has cut prices on Surface tablets as sales failed to meet expectations

Microsoft shares fell sharply on Wall Street, a day after the software company posted dismal quarterly results due to weak demand for PCs and disappointing sales of its Surface tablets.

Brokerages Raymond James and Cowen & Co cut their ratings on Microsoft stock by a notch to "market perform" and at least five others trimmed their share price targets by as much as $3.

Microsoft posted lower-than-expected quarterly earnings on Thursday, hit by a $900m write down on its Surface tablets after it cut prices.

The company's shares dropped almost 11% in early trading.

Earlier this week, Microsoft said it was drastically cutting Surface prices to entice buyers, reducing the value of the devices in its inventory.

Microsoft launched Surface tablets last year to challenge Apple's iPad, but their sales have failed to meet expectations.

"Unfortunately, the new Windows RT operating system has not been the hit Microsoft had hoped for," Cowen analyst Gregg Moskowitz said in a note, adding that investor expectations for the tablet were never very high.

Janney Capital Markets analysts said the write down was an admission that Microsoft's first attempt in the tablet market had not been successful.

The company also said it expected revenue from Windows software to continue to fall due to a weak PC market.

Microsoft's outlook points to a weaker PC market, shifts towards subscription revenue and a pause ahead of the Xbox One gaming console release, all of which are expected to put revenue growth under pressure, Morgan Stanley analysts said in a note.

Xbox is the only device by Microsoft that has found a following among consumers and a new version is expected to launch this year.

Keywords: microsoft, surface