Credit: Reuters/Robert Galbraith
There are failed products, and there are failed products. Consider three notable flops: Apple's Newton, Ford's Edsel, and Microsoft's Surface. The Newton failed because the technology simply wasn't ready for prime time. The Edsel failed because it was ugly and its design was wildly out of sync with consumer preferences. But the Surface outdid them both: Its technology is badly flawed, and it's entirely out of sync with what the buying public wants.
And now we learn that the Surface has done even more damage to Microsoft than was apparent last week when the company announced a $900 million writedown on the millions of unsold Surface RT tablets piling up in warehouses. It turns out that total sales of both the Surface RT and the Surface Pro amounted to a paltry $853 million, according to the 10-K report to the Securities and Exchange Commission Microsoft published this week.
[ Bill Snyder explains why Apple has thrived but Dell may die. | Woody Leonhard outlines the fundamental failure of the Microsoft Surface. | Stay ahead of the key tech business news with InfoWorld's Today's Headlines: First Look newsletter. ]
That's $53 million less than the charge Microsoft took for the Surface RT debacle and reflects revenue it collected after it cut the price of the ARM-based tablet to $150. With all due respect to my colleague Woody Leonhard, who said the other day that the company's quarterly report didn't include any "heart-stopping revelations," this one is a real chest-grabber. (Leonhard changed his tune when the 10-K came to light.)
The ugly sales figure illustrates the total failure of the Surface, which in turn illustrates the failure of Windows 8 and leadership at Microsoft. Somebody has to take the hit for this, and that person is CEO Steve Ballmer.
Is the Surface worse than the Edsel?
Leonhard and others are right when they call the Surface a $1 billion failure. But Microsoft is sitting on a huge pile of cash. From a purely balance-sheet perspective, it's ugly but not that big a deal. But in the broader context, it's more than a big deal: It's a systemic failure. Microsoft has not come to grips with the slow death of the PC market, and the Surface is merely a symptom.
Consider the Newton. That happened so long ago, most of us have forgotten it ever was born. If you do a search on Bing images for "Doonesbury Newton cartoon," you'll see the famous strip where Mike tries to write "Catching on?" on his new Newton and it replies "Egg Freckles?"
Ridicule is the severest form of criticism, but the Newton didn't do long-term damage to Apple, even though it was an expensive flop. That's because it actually was a good idea. What's more, it was a precursor to the very successful Palm Pilot (launched in 1997) and a distant ancestor of the iPhone.
Note the time span between the Newton and the Palm Pilot: four years. That's how far Apple was ahead of the curve.