Poor sales of Microsoft’s Surface raider

Microsoft's move into the hardware market was always going to be a risk. In a market where Apple led the way – and has subsequently dominated – the Surface had an uphill battle. Released last October, Microsoft had high hopes for the tablet which would showcase the firm's new touch-optimised operating system, Windows 8, in all its glory.

It must have made uncomfortable reading then when the company’s latest set of results revealed a $900 million charge for Surface RT, a writedown that comes courtesy of the unsold stock of the ARM-based device. The company earlier this week announced that it was dropping the price of the Surface RT by €150 in a bid to speed up adoption of the tablet but hurting its balance sheet in the process.

You can’t blame the poor sales of the Surface simply on the price though; its availability is limited for a start.

There is also the Surface Pro, released a few months later, lurking in the background, which offers significantly more power than its RT counterpart – admittedly for a heftier price tag – but must have eaten into the potential market. The Surface Pro tablet, incidentally, hasn’t been discounted.

Microsoft has struggled to get to grips with this brave new world. It has suffered accusations of stagnation, with Vanity Fair referring to its "lost decade" where the once innovative company fell behind rivals. Its next generation console, the Xbox One, had a rocky start and is due to go head-to-head with Sony later in the year.

For its part Microsoft has tried to adapt, bringing its phone software and its desktop operating system to the touchscreen. There have been mixed results: Windows Phone is still far behind Android and iOS but shipments are creeping up. Windows 8, at the last count, had already sold 100 million licences. A few tweaks later – Windows 8.1 brings the much-mourned Start button back – and Microsoft is confident that the hold-outs will take to the new operating system.

The company has pledged to do better, particularly in the mobile space, and demonstrated its commitment by shaking up its organisational structure, a move that was unveiled by chief executive Steve Ballmer last week.

For the first time the company has a single dedicated devices unit, and intends to transform itself into a “devices and services” leader.

But it might take more to return the company to its former glory. Faced with a declining PC market, Microsoft must find a way to appeal to consumers in the way it once did or risk settling for runner-up.