The encyclopedia · Software & IT · Product decision · 2012–2013
Microsoft's Surface RT sold so poorly they wrote off $900M — dropped in 9 months
Microsoft's first PC ran Windows RT — could not run Windows software. Consumers baffled. Microsoft wrote off $900M in July 2013 and discontinued it.
Microsoft · 2013-07-18
What happened
Microsoft launched the Surface RT on 26 October 2012 as its first in-house designed PC, positioned directly against Apple's iPad. The device was thin, sleek, and well-reviewed for its hardware. But it ran Windows RT, a version of Windows 8 designed for ARM processors that could only run apps from the Windows Store — it could not run any of the millions of traditional Windows desktop applications that defined the Windows ecosystem.
The naming was the first problem: consumers could not tell the difference between Surface RT and the full Windows 8 version (Surface Pro), which could run all legacy software. Both devices looked nearly identical, but one was severely limited. Many buyers only discovered the limitation after purchase, when they tried to install their existing software and found it would not work. Reviews turned from positive to damning as the truth sank in.
Sales were disastrous. In July 2013 — less than nine months after launch — Microsoft announced a staggering $900 million write-down on unsold Surface RT inventory. The company cut the price 30% worldwide and officially discontinued the device on 18 July 2013. CEO Steve Ballmer called the Surface RT a 'learning experience.' Microsoft pivoted to the Surface Pro line, which ran full Windows, and never made the same mistake again.
Why it happened
- The Surface RT looked like a Windows laptop but could not run Windows software — the one thing that made Windows valuable, and the one thing Microsoft removed to compete with iPad
- The naming was deliberately confusing: Surface RT and Surface Pro looked identical but had fundamentally different capabilities, tricking consumers into buying the wrong device
- Microsoft rushed to compete with iPad without understanding its users — stripped Windows of its main advantage (software compatibility) to chase a form factor iPad owners already had
The lesson
Stripping Windows of its ability to run Windows software to compete with iPad was like a car without an engine because people liked the shape. The one advantage you had is the one you gave away.
Aftermath
Microsoft learned the lesson well. The Surface Pro line, which ran full Windows, became increasingly successful over successive generations, eventually establishing Microsoft as a credible PC hardware maker. The Surface RT failure taught Microsoft that Windows's compatibility with existing software was its core competitive advantage, not a feature to cut. The $900M write-down is studied in product strategy courses as the cost of confusing your customers about what your product actually does.
Sources
- ZDNet — Microsoft's $900 million Surface RT write-down: How did this happen? (18 Jul 2013)
- Wikipedia — Surface RT (announced June 2012; launched 26 Oct 2012; Windows RT only runs Windows Store apps; $900M write-down July 2013; 30% price cut; discontinued 18 July 2013; Surface Pro became the successful line)
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