Is it really true that Microsoft is sitting on six million unused, unsold Surface RT devices?
It looks like it. Yesterday during its regular earnings call, the company announced a surprise $900 million write-down related to an "inventory adjustment" of Surface RT units, parts, and accessories. You might as well call that a round billion dollars.
That's a lot of Surface RTs. It's way, way more than I'd speculated that they'd made. My guess was that they'd probably gone out there and made a million of the things initially.
Believing that you can clear such a vast stock of that many units of a new, untested product, that's more to the point your first foray into making hardware takes you way past optimistic, way past confidence, and whilst you're barely slowing down through arrogance to smack head first into hubris.
Surface RT only ever had one thing to compete against. Namely, the iPad.
The reason why I was so disappointed with my Surface RT was that it wasn't a better product than the iPad.
I believe in a market of healthy competition, customer choice. I spent the whole of the second part of last year totally convinced that Sinofsky and Co were going to finally create something that gave the iPad a run for its money. I think the iPad is a fantastic device, but -- honestly -- if someone gave me something better, I'm not proud. I'd switch in a heartbeat.
In this chart prepared by my ZDNet colleague Adi Kingsley-Hughes, we can see iPad sales over time.
What those numbers show, when compared against an initial order of, say, seven million Surface RT's is that Microsoft seemed to have this total self-belief that from nowhere they could sell iPad like numbers. Right off the bat.
The company's behaviour looks very much like they felt the iPad to be a soft target. Almost as if they were saying, "why are people buying these rubbish iPads? Windows is much better! Our OEMs tend to build rubbish kit though... Aha, we'll do it ourselves! And our customers can haz Office!"
Here's my interpretation of The Microsoft guide to competing with the iPad:
- Step 1: Put some effort into industrial design.
- Step 2: Slap Windows and Office on whatever you've designed.
- Step 3: Ignore anything you can learn from Apple and their customers.
- Step 4: Order seven million units.
- Step 5: Profit!
Two things there. Firstly, the iPad was introduced into a virgin world that was ready to accept a new way of "doing computing". Coming out against strong competition is different to coming out to nothing. (Note how Google essentially just copied the iPad. Android tablets are now actually good.)
Secondly, the iPad was straight out-of-the-gate a perfectly put together consumer proposition. It was both immensely simple, and polished. No one turns on an iPad for the first time and is lost. It's slick, simple, and accessible, and it always has been.
The reason why I refer to the mistakes Microsoft made with Surface RT as "a new gold standard in hubris" is because it appears to totally, totally misunderstand what the iPad actually does for people and almost shows a lack of respect for the thinking that Apple's engineers put into the product.
The iPad works because it scratches an itch that people had. People like social networking services. People like getting information from the internet. People like being able to pick and choose when they watch TV. The iPad let's people do that more conveniently, and in a way where the technology they have to deal with recedes into the background because it's simpler, more polished, better packaged.
What Microsoft's engineers saw when they looked at the iPad was a chassis and an ARM processor. They seemed to think that all they had to do was just ram Windows onto it and everything would be fine.
And along with Windows came all the complexity. Plus, they managed to make the proposition of Windows more complex by breaking backwards compatibility with x86 software.
That problem with complexity was exacerbated by the fact the product was classic v1.0 Microsoft fayre. Microsoft's systems and processes are designed to create a good v3.0 product. Which is fine if people will bear with you, which in Consumerland they typically won't for the simple reason that most people don't care that much. They just want what they've spent their money on to work well first time.
This piece is not just me having a schadenfreude moment -- unless every single employee at Microsoft manages to understand why the iPad works for normal people, and why fast followers like Google, Samsung, and Amazon also do -- give it ten years and Microsoft will be just like IBM is today.
So please, if you happen to work at Microsoft, please try and get your head around why people like the iPad?
Surface RT deserved to sell as it did. It was a poorly executed product that misjudged the market spectacularly.
Hubris, thy name is Ballmer. Or Sinofsky. Although one of those two is slightly easier to blame at this point.
What do you think? Post a comment, or talk to me on Twitter: @mbrit.