Why Microsoft's Tablet Is Officially a Flop

Remember when Microsoft unveiled the Surface last year? Ads for its answer to Apple's iPad seemed to be everywhere, with business-casual breakdancers flying across TV screens, the Internet, billboards, and pretty much any other place you can stick a commercial. Given how heavily plugged it was, you might think the slick new tablet would perform outstandingly since its October release.

You would be very wrong.

The Surface's sales figures are out, and they're far below Microsoft's expectations. Should Microsoft be concerned, and will this affect its strength as an investment?


Breaking down the stats
According to Bloomberg, Microsoft originally purchased 3 million Surfaces from its manufacturers, and within the past five months, the company has sold only 1.5 million. Ouch.

Out of the total amount of Surfaces sold, 0.4 million units have been the Surface Pro, while 1.1 million have been the cheaper Surface RT. This might look like a depressing stat for the Pro, but the more expensive version was released four months after the RT, and so far the Pro is selling at a faster rate. The Pro has sold 0.4 million units in little over a month, while it took five months for the Surface RT to sell 2.75 times that amount.

If the Pro and RT continue at this rate, Microsoft will be able to sell off the rest of its Surface inventory by October. But when Apple is selling 58.31 million iPads annually, Microsoft's Surface is hardly taking a bite out of the market share.

But what I really want to do is make pens
Surface's sales stats aren't good news for Microsoft's foray into hardware, but the tech giant's CEO, Steve Ballmer, doesn't appear to be worried. In a recent interview with MIT's Technology Review, Ballmer said he was "super-glad [Microsoft] did Surface," but that the company was trying to use this product as a gateway to a new idea: the computerized pen.

Huh?

"We've been talking about pen computing for years, but it was hard to do that with OEMs who were not equally incentivized," Ballmer said. "Now we're trying to lead a little bit with Surface Pro. We have a model that allows OEMs to move with us." In other words, Microsoft created Surface to be a playing field for the company's new ambitious device.

Going beneath the Surface
These disappointing Surface statistics are certainly a loss for Microsoft, but that's no reason to rule out the company. Internet Explorer is still the dominant force in Web browsers, and Microsoft Office Suite is practically the default administrative tool belt for offices everywhere. And now, according to its CEO, the company's tablet was less an attempt to rip off Apple's iPad and more a springboard for a new innovation. We'll see how this holds up in time. For now, it's hard to deny that the Surface looks and acts like an iPad, but certainly doesn't sell like one.

It's been a frustrating path for Microsoft investors, who've watched the company fail to capitalize on the incredible growth in mobile over the past decade. However, with the release of its widely anticipated Windows 8 operating system, the company is looking to make a splash in this booming market. In this brand-new premium report on Microsoft, our analyst explains that while the opportunity is huge, the challenges are many. He's also providing regular updates as key events occur, so make sure to claim a copy of this report now by clicking here.

The article Why Microsoft's Tablet Is Officially a Flop originally appeared on Fool.com.

Fool contributor Caroline Bennett has no position in any stocks mentioned. The Motley Fool recommends Apple and owns shares of Apple and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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