MSFT has a BAD Q4 thanks to the Surface RT

Microsoft's fourth quarter earnings and sales missed expectations by a wide margin as the PC market slowdown and a writedown of Surface RT inventory painted a bleak picture.

The company reported fourth quarter earnings of $4.97 billion, or 59 cents a share, on revenue of $19.9 billion. The results include a $900 million inventory writedown for Surface RT that amounts to 7 cents a share.

Wall Street was expecting Microsoft to report fourth quarter earnings of 75 cents a share on revenue of $20.73 billion. For the year, Microsoft reported earnings of $2.58 a share on revenue of $77.85 billion.

MSFT issued these statements:

It's important to note that consensus analyst EPS estimates include the revenue related to the Office Upgrade Offer, but do not reflect the exclusion of the $0.07 EPS for the Surface inventory adjustment.

We believe most analysts will take an operating view and adjust for the $0.07 per share for the Surface RT write-down. For comparability to pre-release analyst estimates one could use our GAAP EPS of $0.59, plus the $0.07 per share for the Surface RT write-down, or $0.66 per share.

The size of today’s inventory adjustment primarily flows from the Surface RT price reduction we announced earlier this week.  The price reduction, increased distribution, and expanded channel availability are all intended to accelerate adoption and better position us for success over the long-term.