Friday July 19 2013
The announcement by MSFT of earnings and a write off on its 'high profile Surface RT Tablet' (the WSJ description not mine) offers a good deal of insight on why we study accounting.
E/S Expectations were for 75 cents, actual versus 66 cents
I assume the R & d expenditures were capitalized once the Tablet came on the market. but MSFT hd to admit there is nothing there and so the impaired asset was written off.
Here is the CFO's comment.
“We reduced the price of the Surface RT by $150 to $349 per device,” she explained. “As a result of this price change, as well as the inventory adjustments for related parts and accessories, we recorded a $900 million charge to our income statement.
Read more: http://www.itpro.co.uk/tablets/20229/surface-rt-900m-write-down-hits-microsofts-q4-hard#ixzz2ZUm2bEEL
And so the stock price dropped 6.3% in after hours trading. You see, the failure to hit an earnings estimate impacts the stock price. Frankly I was mystified as to why MSFT stock had risen to over $30, does anyone reading this blog own a Surface RT Tablet, better yet, has anybody even seen one in use, i have not.
Or as Amy Hood CFO put it
'I want to be very clear. We know we have to do better particularly on mobile devices.
Yeah but when will that happen? MSFT dropped the price on the table by $150, from %500 to $350, a 30% price cut. Do you suppose there is any gross margin in that for MSFT?
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