Microsoft's foray into the tablet market has resulted in the firm having to swallow a $900 million write down, after failing to shift significant numbers of Surface RT devices.
The software giant revealed details of the write down during a conference call to discuss its fourth quarter results, which saw the firm post a revenue of $19.9 billion.
This was $850 million short of Wall Street's expectations, as dwindling PC sales blighted the earnings of its Windows business.
Amy Hood, Microsoft's chief financial officer, blamed the Q4 decline in its Windows business on consumers shunning traditional PCs in favour of other form factors.
"We are working to transition the business into this modern era of computing, taking advantage of the new scenarios enabled [by] Windows 8," she said.
"As we said before, given the complexity of the ecosystem, this journey will take time, but we continue to make incremental progress."
Hood went on to talk about the Surface RT write down, and claimed it was the result of the firm's recent decision to cut the price of the device.
"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.
"We believe this pricing adjustment will accelerate Surface RT adoption and position us better for long term success."
Microsoft's Surface tablets have not had the easiest of product debuts, with both models receiving mixed reviews, while the relatively high price of the devices has been described by market watchers, including IDC, as off putting for PC buyers.
The company has also been criticised in the past for its tablet distribution strategy, which was acknowledged by Microsoft CEO Steve Ballmer as one of the reasons the Surface had only enjoyed "modest" sales in the wake of its launch last October.
This is an issue Hood said Microsoft was in the process of addressing, by ramping up the number of retail outlets selling the devices.
"We [have] expanded the availability of Surface to our business and institutional...[and] commercial customers are able to purchase Surface devices from authorised resellers in the US," she added.
"Over the next few months we will authorise commercial distributors and resellers in more countries [to do the same]."
