5 Companies That Had A Rough Week

The Week Ending Aug. 2

It wasn't the best of weeks for Microsoft and its efforts to become a player in the tablet PC market with its Surface tablet and Windows RT operating system. This week's roundup of companies that had a rough week include Microsoft's disclosure of its own Surface sales figures, as well as bad news on the OEM partner front.

The sales numbers also weren't good this week for a major server manufacturer. This week's news also included a report that the SEC is investigating a major IT vendor for how it accounts for cloud service sales. And a West Coast solution provider is facing charges for allegedly selling illegal Cisco equipment.

Microsoft's Surface Revenue Numbers Reveal Extent Of Tablet Debacle

The evidence that Microsoft's Surface tablet was a market dud has been building for weeks, everything from slashed prices and deep discounts on Surface prices for partners, to a $900 million charge against fourth-quarter earnings for unsold Surface RT units.

This week Microsoft disclosed in its annual 10-K filing with the Securities and Exchange Commission that Surface tablet sales were $853 million in fiscal 2013.

The company didn't disclose the number of units it has sold. But given that the $853 million sales figure included sales of both Surface RT and Surface Pro tablets, and the company took a $900 million charge just for Surface RT inventory, it's clear Microsoft's foray into tablet hardware has, so far, been a bust. The 10-K also noted that the company spent $898 million in fiscal 2013 to advertise Surface and Windows 8.

Asus Shuns Windows RT

In another sign that Microsoft's tablet PC hardware and software efforts are faltering, device maker Asus is distancing itself from Windows RT, the version of Windows that runs on ARM chips and powers Microsoft's own Surface RT tablet.

Asus is one of just four OEMs that launched Windows RT devices in North America. But this week Asus Chairman Jonney Shih, in an interview with AllThingsD, said his company had struggled to sell the VivoTab RT tablet. Going forward, he said his company would focus more on selling Intel-based Windows 8 tablets.

Last month Lenovo said it was removing its Windows RT-based Yoga 11 laptop-tablet hybrid from its online store. Other manufacturers, including Hewlett-Packard, Acer and Toshiba, have either delayed or scrapped plans to sell Windows RT tablets.

HP's Share Of The Server Market Continues To Slide

Hewlett-Packard's global server shipments dropped significantly in the second quarter, according to preliminary data from research firm Gartner obtained by CRN this week. The slower sales resulted in HP losing market share in the highly competitive server market for the second straight quarter.

HP second-quarter server unit shipments dropped by 13.5 percent year over year, according to the preliminary Gartner data. That follows a 15 percent drop in server shipments for the company in the first quarter. Still, HP managed to maintain its No. 1 position in the global server market against rivals Dell, IBM and others.

Analysts say HP is getting hit by marketplace trends, including a move away from traditional rack and blade servers toward servers running hyperscale data centers.

SEC Probes Cloud Accounting Practices At IBM

The Securities and Exchange Commission is scrutinizing how IBM reports revenue generated by its multibillion-dollar cloud computing services operation. IBM disclosed the SEC probe in its second-quarter 2013 quarterly report filed this week with the SEC.

IBM issued a statement saying it's cooperating with the investigation and the company stands by its accounting practices.

Observers said there aren't enough details to determine whether the investigation would have any material effect on IBM's past financial results or its cloud business going forward. IBM has said it expects that business to grow to $7 billion by 2015.

Owner Of Cisco Reseller Faces Fraud Charges

The owner of San Jose, Calif.-based Network Genesis, a Cisco equipment reseller, was arrested this week after allegedly selling millions in fraudulent Cisco gear and then using the money to buy real estate and luxury cars.

Cuong Cao "Calvin" Dang faces charges on multiple counts of fraud for allegedly selling "counterfeit or stolen Cisco merchandise" between January 2006 and January of this year, according to an indictment filed with the U.S. District Court of Northern California last week.

Dang allegedly bought illegal products from Cisco employees, according to the indictment, including Catalyst 6500 series switches and 7600 series routers, altered their serial numbers to make them difficult to trace, and sold them as genuine Cisco products.