Microsoft Corporation (MSFT) Admits, Disputes Consumer Reports Charge

Microsoft Corporation (NASDAQ:MSFT) has won a lot of praise for its Surface line of laptop hybrids, but it looks like at least some of those compliments were misplaced. So says a leaked internal memo. According to the info, the Surface and Surface Book were initially being returned at noticeably high rates.

The memo was picked up and reported on by Paul Thurrott over at his blog. The memo appears to have been prepared specifically to counter a Consumer Reports story that questioned the reliability of the firm’s Surface range.

According to the memo Surface Book and Surface Pro 4 return rates peaked at 17 percent and 16 percent respectively. The long term averages both remained fairly high in the period through launch until April 2017, the date at which the memo stops its presentation of return data.

Microsoft Surface gets returned

According to Thurrott, Microsoft had tried to blame its hardware problems on Intel. The reality, however, is that the firm’s own Surface software is what caused the issues. The leaked memo was authored by Panos Panay, who heads up the firm’s Surface division.

Microsoft Surface Laptop
Microsoft Surface Laptop

As well as outlining the return rates, it also goes through the Microsoft Corporation (NASDAQ:MSFT) efforts to find solutions. Panay wrote,“These improvements were unfortunately not reflected in the results of this survey,” referencing the recent research done on the device by Consumer Reports.

The firm is certainly trying to contain the blowback from that research. The bottom line in the report is that things were bad, but now they’ve been fixed. Return rates for the Surface line have dropped by a large margin. That’s not where the story ends, though.

Thurrott is particularly dismissive of Panay’s attempt to use the Surface Net Promoter Score to argue about the improvements. He writes, “NPS does not measure reliability, which is what Consumer Reports is estimating. It measures customer satisfaction.” That, in his view, makes it an incongruous part of the argument.

The central claim is that the reliability problems are ancient history. Surface buyers are happy with their products, and the hardware keeps getting better.

Those holding Microsoft stock are probably wishing this story would stop sucking the air out of the room.

Don’t expect hardware to move Microsoft Stock

The Surface line has never been a core part of Microsoft Corporation (NASDAQ:MSFT) business, so don’t expect investors to care all that much about this leak. Satya Nadella’s efforts in cloud computing and services are what really drives the firm’s bottom line and investor sentiment.

Sure, Microsoft stock may have suffered a little bit when it wrote off its entire Surface line back in 2013. When the firm had to do the same to Nokia it certainly stung. Neither of these really impacted the longer term trend in the firm’s share price, however.

That’s because bad investments are an assumed cost of tech development. Under Steve Ballmer, at least in his closing years as CEO, the firm focused on a strategy of emulating Apple Inc. (NASDAQ:AAPL) The idea was the Microsoft could offer an alternative full ecosystem. That dream is all but forgotten.

Instead the firm redoubled its focus on software, services and the cloud. It’s making its applications available across mobile platforms. It’s also spending huge amounts of money on building out its business cloud platforms. That’s the future of Redmond, hardware issues or no.

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