iSuppli: Surface Dogged by Low Sales, High Returns

The market researchers at IHS iSuppli say that Microsoft’s Surface with Windows RT tablet got off to a bad start in late 2012, selling well under one million units. But more troubling for the budding devices and services firm is news that Surface returns were “very high.”

Officials from iSuppli told CNET this week that Microsoft delivered 1.25 million Surface with Windows RT tablets into the channel in Q4 2012 following the product’s late October launch. But actual sales of the device were “significantly lower,” the firm claims: About 55-60 percent of number. If true, Microsoft sold, at most, 750,000 Surface RT tablets.

To be fair, Surface RT sales were extremely limited for most of the quarter because Microsoft elected at first to sell them only through its own retail and online stores. But the firm claimed that heightened demand caused it to change plans and start selling it from third party retailers in December. (I had previously exclusively reported Microsoft’s original plan to open up Surface sales to other retailers when the Surface Pro arrived in early 2013.)

But iSuppli threw cold water on that story, too: It claims that it has seen neither heightened demand nor any evidence of increased Surface production. Indeed, the firm claims Microsoft is still trying to sell off the unsold inventory.

But the most troubling news, perhaps, is that “very high” return rate: iSuppli claims that that return rate, coupled with the sales issue, is “indicative of a problem.” The firm cites the “steep learning curve” of Windows 8/RT, plus the “distinct lack of interest” in Windows RT overall.

Surface Pro, of course, is launching next week. This new device is a “real” PC in that it’s built around a well-understood Intel chipset and runs the standard version of Windows 8 Pro and not the curiously limited Windows RT. But questions remain about this device—not the least of which surround its battery life, which is about half that of Surface RT—and its heady price of $900 to $1000, without keyboard. If Microsoft is serious about making the Surface lineup successful, it should consider immediately lowering prices on both versions.