Did Walmart just sell out of Microsoft Surface RTs?

Did Walmart just sell out of Microsoft Surface RTs?

Summary: A couple of weeks after Microsoft's $900 million Surface RT write-down, Surface RTs seem to be selling -- at least at Walmart.

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Don't look now, but Walmart may have just sold out temporarily of Microsoft's recently discounted Surface RT devices.

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Yes, those same Surface RTs that Microsoft repriced and are now $350 (plus $100-plus for a keyboard/cover). The Surface RTs that were responsible for Microsoft's $900 million write-down which it took in Q4 FY 2013.

Robert McLaws, Chief Technology of AdvancedREI, tweeted me about what looks to be an "out of stock" situation for 32 GB and 64 GB Surface RTs purchased from Walmart online. Some U.S. stores are still showing availability in-store, however, of one or both Surface RT models.

On its Web site, Walmart is advising customers that they may not have their Surface RT orders filled in stores for another week or so.

Does Walmart's Surface RT stock status prove $350 was the magic price point at which Microsoft initially should have used as its Surface RT entry point a year ago in October, instead of going with $500? Maybe...

It also could be the case that after Microsoft's various Surface discounts -- at its own and others' recent shows and conferences -- more people have had a chance to kick the tires of Surface RT devices. Microsoft officials now believe that Surfaces aren't products that users will shell out to buy online without having at least some, quality hands-on time with them

Surface RT: It's about both demand and supply

The bigger and still unanswered questions are how many Surface RT devices Microsoft made and how many it has sold to date. In an internal town hall meeting at Microsoft last week, Microsoft CEO Steve Ballmer admitted to employees that Microsoft made too many Surfaces. (Duh.) But no Softie has said publicly how many Surface RTs were too many -- or how and why Microsoft over-ordered.

Simply taking the two known numbers -- the total write-down and the discount on each Surface RT -- to calculate the number of Surface RTs manufactured is overly simplistic, said Directions on Microsoft analyst Michael Cherry.

The $900 million write-down also included parts and accessories, Cherry noted. And many forget that Apple is the master of tying up critical elements of components the company needs in order to build an adequate supply of consumer electronics.

"When Microsoft decided to step into the world of building tablets I wondered how this differed from what they already built (mice, keyboards, and Xboxes)," said Cherry. "I assumed that a lot of money went into: a) buying parts; b) buying time in a plant; and c) building sub-components such as milling the metal chassis that they were going on about so much."

Because Microsoft was intent on keeping its Surface RT plans secret, Cherry said he assumed a lot of the company's component/part purchasing was done at the last minute, and therefore, "had to cost a lot." In some cases, Surface parts might have been shipped by air rather than container ship, for example, in order to meet last-minute deadlines.

"They also likely had to pay a lot to hold capacity open in case it really took off, which now, there may not be a need for," Cherry added.

We also know that Microsoft is working on what officials called at the company's Worldwide Partner Conference "updates" to the Surface RT and the Surface Pro -- both of which are due to launch some time during Microsoft's fiscal 2014 (which runs from July 1, 2013 to June 30, 2014). Microsoft Chief Operating Officer Kevin Turner publicly stated these dates and the existence of these updates during his keynote remarks in Houston.

If Microsoft is planning to use any of the same components and parts in its second-generation Surface RT and Surface Pro devices as it does in its generation one models, the $900 million write-down also may include depreciation on those parts.

Once Microsoft goes public with specifics about the next Surface RT and Surface Pro devices, further/new discounts on the current models also will be likely. I'd think Microsoft officials would have figured any future discounts into this $900 million figure, rather than have to do another write-down during a future quarter.

Microsoft officials aren't saying anything more about Surface RT's past or futures. They are insisting that positioning the Surface RT more clearly as an iPad competitor, but one that's more focused as a productivity tablet, will help it gain market momentum.  

Topics: Microsoft Surface, iPad, Microsoft, Tablets, PCs

About

Mary Jo has covered the tech industry for 30 years for a variety of publications and Web sites, and is a frequent guest on radio, TV and podcasts, speaking about all things Microsoft-related. She is the author of Microsoft 2.0: How Microsoft plans to stay relevant in the post-Gates era (John Wiley & Sons, 2008).

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83 comments
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  • Windows RT tablets were priced much to high, initially

    I believe there are two factors at work here:

    1. Value
    2. Back-to-school

    P.S. Microsoft should further reduce the cost of Windows RT by removing the desktop and making Microsoft Office optional across all form factors. Perhaps Mozilla would port Firefox to Windows RT if the desktop were removed.
    Rabid Howler Monkey
    • Should've been $399 at launch w/ Office apps sold in App Store

      Surface RT should've been $399 at launch with MS Office sold in the app store separately. Not everyone buying the device wanted Office, but they could have sold more at the $399 price then made up the losses on app store downloads of MS Office. It would have also driven more traffic to the app store and reiterated the importance of Office apps by dominating the top paid list. Instead they bundled Office and forced it on everyone and now are devaluing Office by giving it away for free. The Acer W3 and Surface RT both come with Office free and they're having their prices slashed. Not only is the hardware being devalued, but so is the perception of the software bundled on both.
      cool8man
      • Office apps its free for them

        If MS is launching a new platform, the embedded software is free for them, they should have added the whole bundle, however its the hardware what people consider in that moment.
        danidemonio
      • cool8man... you should be called bullseye.

        Office is both the solution and the cause of all of Surface RT's problems.

        The fact that Microsoft decided to start such a big project like RT without the Office team aboard is the stuff books are gonna be written with for the next 5 to 10 years.

        I've always thought that dBASE IV, Apple's Newton and Windows Vista were the MAYOR catastrophe's in IT. Surface is far exceeding all of these, having lost 900 big ones in its FIRST year.
        cosuna
    • You Forgot

      3. The people of Wal*Mart!

      Who else (except Toddy) would buy an RT?

      http://www.peopleofwalmart.com/
      Gr8Music
      • Win RT: You have to understand the pros and cons

        I think the reason that people are unhappy with Win RT tablets is that they didn't take the time to research and understand the lengths and limitations of this type of tablet. If you go in thinking it's going to run all your Windows apps, of course you're going to be unhappy. I've done my research and read the articles about Win RT tablets and believe these would do just what I would want a tablet to do. Just as with an android-based tablet, I know it's not going to run my desktop Windows applications, you have to do some research to find apps that will work on it. I would want to use it for light Office work, checking e-mail, and media consumption. RT would work fine for me. If you need to run desktop apps or need more power, you're going to need to move up to the more expensive Windows 8 Surface tablet or stick with a notebook. I think the problem for Microsoft so far is that they have not effectively addressed what Win RT tablets can and can't do, though I don't know that's a problem just for RT tablets (I had a friend recently buy an Android-based tablet. She's not a computer enthusiast, strictly a consumer, and was surprised to learn she couldn't install Windows software on it and it required software specifically written for it).
        jrbales2
  • Not to worry

    There's six million more of them gathering dust in a warehouse.

    http://www.news.com.au/technology/tablets/microsoft-ceo-steve-balmer-admits-surface-rt-tablet-a-mistake/story-fn6vigfp-1226687428164#ixzz2aRyizS9t
    Englishmole
    • Exactly.

      The reason Walmart sold out is because they stopped ordering them when they realized nobody was buying them. They likely have no plans to reorder more. The millions sitting in Microsoft's warehouses aren't going anywhere. It's a shame that Microsoft had to tie Metro into every platform. If Metro had been used as a tablet and phone OS exclusively, it might have had a chance. Because most of us don't like Metro on the desktop, we see no reason to get it on our tablets. The tablets we're already using interact just fine with our desktops.
      BillDem
      • College...

        College bound kids are buying them big time. Apple stuff does not provide the interface to school systems all based on Microsoft architecture.

        The price drop helped big time. RT sales are not being driven by corporations. That is yet to come when 8.1 is released and IS staff see they can now support that world.
        RayInLV
      • Ignorance

        Ignorance speaks again!!

        If you only use a bunch of traditional desktop apps then you don't have to leave the desktop veneer and you can stop complaining

        However for tablets I've used both units with Win 7 (hence desktop only) and Win 8 metro and the metro interface is nicer on tablet/touch devices - also like the new 8.1 metro even on my quad HD touch screen desktop
        archangel9999
      • didi mwalmart just sell out Microsoft surface RT's

        you should not make statements you cannot prove. one thing for sure the surface Rt has built Microsoft office and is getting outlook next year and is getting a lot of Windows 8,1 blue updates so if a person buys these discounted Surface Rt tablets they are useful right out of the box because of the fact they have Microsoft and more apps are coming
        gregnewm7
      • No problem with Metro on Tablet or Phone

        I'd have no problem buying a tablet or phone with the Metro UI, specifically hardware that has a touch interface. That's where it makes sense to me. Now, I agree with you, I DON'T like Metro on a desktop PC or my (non-touch) notebook, have not upgraded the desktop and though I did on the notebook (back when they offered Windows 8 Pro for $40.00) I have downloaded the Start8 program so I could boot directly to desktop and have a Win-7 style Start Button. So any future tablet, I'll have no problem purchasing with Windows 8. Desktops...I'll build my own PC and keep Windows 7 as long as I can find a copy.
        jrbales2
  • RT -The new killer tablet

    For the current price, Surface RT is of unparalleled value. Reduce the price of accessories and we will have a real winner.

    Tegra performance is not impressive, but second generation surface can fix that.

    Surface RT will also be a killer device for education.
    OwlllllllNet
    • Owley, are you in the commercioals

      Please tell us which on is you in this: http://www.youtube.com/watch?feature=player_embedded&v=l2KPQNP1Z1s
      DancesWithTrolls
    • Balmer

      Apparently Balmer disagrees with you.

      http://www.news.com.au/technology/tablets/microsoft-ceo-steve-balmer-admits-surface-rt-tablet-a-mistake/story-fn6vigfp-1226687428164#ixzz2aRyizS9t

      MICROSOFT CEO Steve Ballmer has finally admitted that its Surface RT Tablet was a huge mistake
      THavoc
      • You need to read

        Ballmer admitted they built more then they could sell and then MSFT deiced to lower the price. So the story headline is misleading, Ballmer didn't say RT was a mistake, he said they built more than they could sell and it appears MSFT figured out the devices were overpriced at their initial price point. That's a far cry from admitting they "were a mistake". Wow.. the news media gets it wrong almost all the time and we all hop on thee stories thinking they are actually newsworthy. NOT
        BruinB88
        • Half-dozen of the other...

          "Ballmer admitted they built more then they could sell"

          In common-sense terms, that is admitting "they" made a mistake. You can whine about the literal words, or use your brain to understand them and their intent.
          alboulley
          • You too, are interpreting the statement incorrectly,

            because, when one reads the statement, and highlights the most important word in the statement, it reads: "Ballmer admitted they built more then THEY could sell". The "they" in the statement means Microsoft. So, if one were to rewrite the statement, it would read ""Ballmer admitted they built more then Microsoft could sell". IOW, Microsoft was not equipped to sell as many as they had produced. Now they're having to recruit retailers to sell the remaining stock, and Walmart is proof that there are retail channels that are more effective than what Microsoft initially set up to sell from.
            adornoe1
      • Misleading

        Very poor headline...Ballmer never said it was a failure...that's the problem with most of the articles that love to see "Doom and Gloom" at Microsoft...they twist the headline and stories to make it more to their liking...Orwellian? ;)
        wolters2
        • Only Elop is "good" enough to say

          "our products suck".
          Obviously Ballmer knows it was a failure, we all know RT was a failure, Lenovo knows it, Acer, ...
          AleMartin