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Brier Dudley offers a critical look at technology and business issues affecting the Northwest.

July 22, 2014 at 2:01 PM

Microsoft reveals Surface Mini writeoff, phone sales

Microsoft pretty much confirmed in today’s earnings report that it scrapped the Surface Mini at the last minute.

The company disclosed that its Surface business had a “cost of revenue” expense “resulting from our transition to newer generation devices and a decision to not ship a new form factor.”

The transition is visible in the falling prices of Surface RT tablets that are now available for around $250. Still hidden are the smaller sized Surface Mini devices that were apparently canceled just before a launch event in May.

Microsoft wouldn’t talk about the fate of the Mini – comparable to Apple’s smaller iPad mini – but it forgot to remove references to the device from the user manual for the larger Surface Pro 3 that went on sale last month.

Perhaps that was the cost of burying the inital batch of Surface Mini devices in a Shenzhen landfill, similar to the way  Atari buried its ill-fated “E.T.” video game in New Mexico in the 1980s.

This follows a $900 million writeoff of Surface-related costs in fiscal 2013. (This post has been updated to clarify that the $900 million charge was for the previous year; Microsoft declined to specify the 2014 cost of changing direction on the Surface.)

Other interesting nuggets in today’s report:

– Since the Nokia acquisition was completed in April, Microsoft sold 5.8 million Lumia phones and 30.3 million non-Lumia phones. “Low price point devices drove a majority of the Lumia Smartphone volumes,” the report said.

– Microsoft sold 1.1 million Xbox consoles during the quarter that ended June 30 – boosting platform sales by 14 percent – but the company didn’t specify how many of those were the new Xbox One platform versus the cheaper, last-generation Xbox 360 units.

– More than 5.6 million people now subscribe to Office 365 Home and Personal services, including more than 1 million subscribers added in the fourth quarter. That contributed to a 21 percent increase in Office consumer sales.

– Microsoft’s tax rate jumped from 19 percent to 30 percent. That was largely because of “adjustments to prior years’ liabilities for intercompany transfer pricing.” In other words, Microsoft counted more income in countries with higher tax rates. This suggests that it’s cutting back on the shell game played by big tech companies that try to count as much revenue as possible in tax-friendly locales.

 

 

 

Comments | Topics: earnings, Microsoft, Office 365

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