Microsoft shares slumped seven per cent on Thursday as the sprawling media empire admitted it lost $900 million due to poor Surface tablet sales.
Days after the Windows firm officially cut the Surface RT price - a tablet once considered a key contender in the iPad market - the company told investors it was shouldering a $900 million writedown due to "inventory adjustments".
Since the launch of the Surface tablet in October 2012, Microsoft has managed to avoid detailing the exact sales figures, but it is believed that the company has produced about four million tablets and sold roughly a quarter of that.
Microsoft has more recently tried to pitch its Surface tablets to gamers. The group is building the top-down shooter One million Xbox 360 units shipped during the period, Microsoft said. Pre-tax profit for the division was at $142 million.
Speaking at an investor conference on Thursday, Microsoft's chief financial officer Amy Hood said: "We know we must do better. We are confident we are moving in the right direction".