Microsoft Surface flops in the tablet wars

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Microsoft's share value plummeted by seven percent when the full scale of the disappointing sales for the Surface tablet emerged. A year after its launch, the would-be challenger to the iPad has cost the company an alarming $900 million in inventory writedowns. There must be more than a few embarrassed faces at Microsoft HQ.

The Surface has failed to make much headway in a competitive tablet market dominated by the iPad. Estimates suggest that it has shifted just under a million tablets, giving it a mere two percent of the overall market, way behind Apple and also trailing the Android tablets of companies like Samsung and Acer. That's a long way short of the ambitious projections at launch.

The Surface was a venture into an unknown market for Microsoft which, after building its business with PCS, had mainly concentrated on software and left the hardware to its partners. "It doesn't inspire a lot of confidence," the industry analyst Rick Sherlund told AP. "They are in the hardware business now, and pretty shortly after entering it you have a pretty big writedown. That's embarrassing."

It demonstrates how effectively Apple seized a market that few had anticipated even existed for tablet computers. Apple has a hefty head start on its rivals and continues to tweak its iPad regularly. Microsoft are faced with slashing the asking price for its current version of Surface in order to shift stocks, while developing a more appealing product for the next version.

The setback comes at a tricky time for the company, which has faced widespread consumer resistance to Windows 8. The extent of the hostility has caused Microsoft to launch Windows 8.1, which substantially restores most of the features of Windows 7. The image is of a company somewhat out of touch with its customer base and frantically responding to hostile feedback.

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