Microsoft remains shackled to strategy after $900M 'absolute abomination' of a blunder

Redmond can't afford to dump ARM just because it screwed up on Surface RT, analysts assert

By , Computerworld |  

"They're firmly a hardware company," contended Gillett, pointing to the massive reorganization last week to support the year-old devices-and-services strategy that CEO Steve Ballmer has committed the company to. "They don't need to play in the entire ecosystem, but they must have so-called 'hero' devices, one that show what their software can do."

Gillett saw the write-down as just one example of a much larger transition of Microsoft from packaged software to devices and services, the former exemplified by the Surface line, the latter by the push toward Office 365 subscription and other software as a service (SaaS) efforts.

"Even if Microsoft is making all the right decisions in the transition, it's still a fundamental shift," said Gillett. "No matter what, it's a messy process, although it's even harder if they're struggling."

Microsoft will move on, in other words, after the Surface RT flop, seeing it as not a company-killer or even a reason to change its strategy, but as one of several obstacles it will encounter in the coming years. "This is early in the [Surface] product cycle," Gillett observed "This is just the beginning of at least a two-year slog."

"What this really shows is that being an OEM is tough," said Moorhead of the Surface RT overstock. "It's certainly a lot tougher than Microsoft thought it was. Can you imagine what would happen if Dell wrote off $900 million [because of an operational blunder]? Their stock would get destroyed.

"[Microsoft's handling of] this is an absolute abomination," Moorhead said. "I don't think this is a surprise to many, that Surface RT didn't sell well, but what is a surprise is the magnitude of the write-down."

Lesson learned, or so one would hope.

Gregg Keizer covers Microsoft, security issues, Apple, Web browsers and general technology breaking news for Computerworld. Follow Gregg on Twitter at @gkeizer, on Google+ or subscribe to Gregg's RSS feed. His email address is

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