The main reasons behind the drop in revenue are the disappointing results of Microsoft’s Windows sector and the atrocious performance of its Surface RT line of tablets. The company’s personal computer sales are slowing, as are PC sales around the globe. In addition, MSFT continues to come in second to their rival Apple’s more user friendly Mac. The decline in PC sales is the reason behind the poor Window’s performance as that sector’s profit margin has fallen to 42%. Even more alarming is the $900 million bath that Microsoft Corporation has taken with unsold products from their Surface RT tablet line. The Surface RT has been a huge disappointment and the tablet was wildly over priced at roughly $350. Microsoft has recognized this and recently cut the price by $200 in an effort to attract more consumers. However, the price is not the only problem with the RT. The Surface RT simply isn’t a great product as it runs just 60,000 apps compared to the Ipad’s 400,000 and Microsoft’s Surface Pro, which runs the same apps as the RT along with all Windows apps as well. There really is not a market for the RT and no matter how much MSFT cuts the price the RT is not going to sell because there are better products out there
The poor fourth quarter results for Microsoft signal a larger problem for the company. Their main moneymaker, Windows, is declining in sales and unless they do something to improve their products (like the Surface RT) there will be many more disappointing quarters ahead.