Microsoft's Timing Couldn't Be Worse

Last week, Microsoft reported earnings that sent shares reeling, thanks in large part to a disheartening $900 million inventory charge related to the software giant's Surface RT tablets.

That's a troubling admission that the company was aiming too high with the device that represents Microsoft's biggest entry into first-party hardware. That includes both in terms of price and unit forecasts. At the initial price point of $500, it was going up against Apple's iPad, and Microsoft had reportedly ordered more than 3 million of them. Over the first two quarters, it shipped 1.8 million, including the newer Surface Pro (which was not related to the inventory charge).

A couple of months ago, Microsoft launched an all-out anti-iPad ad campaign targeting Apple's flagship tablet. The company used the same marketing strategy that Apple had used against it years ago, playfully goading its rival and calling out its weaknesses. Microsoft has since released a series of other spots that highlight Surface's advantages.


No less than a day later, Microsoft put out another ad poking at the iPad; considering the inventory writedown, the timing couldn't be worse.

The first shot was actually quite clever, but the subsequent commercials have been less inspiring. In the latest, Microsoft calls out the lack of USB port, integrated kickstand, or keyboard accessory, and then follows up by comparing the $599 price tag to the Surface's recently reduced $349 price point, both for a 32 GB model.

Microsoft is getting more aggressive with taking shots at the iPad, suggesting it won't end well for Apple's tablet. This time, Microsoft is comparing the iPad directly to its Surface, while in prior ads it would compare the iPad to a tablet made by a third-party OEM such as ASUS or Dell.

Of course, Apple has never had a problem selling iPads and has never taken any inventory writedowns approaching $1 billion, but that's not something that Microsoft should be proud of.

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The article Microsoft's Timing Couldn't Be Worse originally appeared on Fool.com.

Fool contributor Evan Niu, CFA, owns shares of Apple. The Motley Fool recommends 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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