Financial analyst slashes estimates of Surface sales, warns it will affect Microsoft's bottom line

Here's more evidence that Microsoft's Surface tablets aren't selling well: Pacific Crest analyst Brendan Barnicle has cut his estimates for how many will sell for the year, and says that reduced sales will eat into Microsoft's bottom line.

Forbes reports that Barnicle believes that Microsoft will sell only 600,000 Surface tablets in the quarter that will end in March, down from an initial estimate of 1.4 million tablets. For the fiscal year 2013, he says that 3 million Surface tablets will ship, down from an initial forecast of 4 million.

Barnicle has also cut his forecast for Microsoft revenue for the quarter to $20.1 billion from $20.2 billion. For the entire year, he revised it down to $78.4 billion from $78.7 billion. Barnicle warns that Microsoft faces a much more serious problem than that relatively small decrease, and it's a warning that Microsoft has heard time and time again:

"Despite an attractive valuation for MSFT, we remain concerned that the company is facing a very challenging transition as the market moves away from PCs, which account for 50% of Microsoft’s revenue, to other devices, where Microsoft has been far less dominant."

There's been plenty of other reports that the Surface isn't selling well. A new Canalys report finds that "only 3% of pads shipped in Q4 2012 used a Microsoft operating system." Tim Coulling, Canalys Senior Analyst said:

"The outlook for Windows RT appears bleak. Hardware OEMs are ignoring it due, in part, to a pricing strategy that does not align with the economics of the pad market. We expect Microsoft to rethink its pricing strategy for RT in the coming weeks. Dropping the price by 60% should get OEMs back onside."

On the upside, at times the Surface Pro has sold out. But that might not necessarily mean that there have been a lot of sales. Microsoft may simply have underestimated demand, or manufactured fewer Surface Pros that it expects to sell, as a way to create artificial buzz. For example, Product Reviews Net said this about that possibility:

These marketing tactics are nothing new because many companies have employed the same sort of practices in the past, with Apple and Nintendo being just two of them. To you and I this is considered unfair, but it does help promote a device, just like the original Wii back in 2006.

We're hearing several stories where some retail stores had very limited stock of the Surface Pro, but in some cases they had none at all, which seems strange considering how long they have had to prepare for launch day.

Still the news isn't all bad for Windows RT and Windows 8 tablets. A recent Forrester report found that information workers want Microsoft tablets more than any other tablets for work. Some 32% want a Windows tablet, 26% want an Apple tablet, and 12% want an Android. The report says 200 million information workers worldwide want a Windows tablet for their next work tablet.

So it's clearly too early to say that Surface tablets, or Windows 8 tablets in general have failed. But the most recent downgrade of Surface sales certainly isn't good news.

FREE Computerworld Insider Guide: IT Certification Study Tips
Join the discussion
Be the first to comment on this article. Our Commenting Policies