Microsoft (NASDAQ:MSFT) has announced that it's starting to run out of pre-order inventory for its freshly announced Surface 2. Before investors get too excited, they should remember that the exact same thing happened with the first-generation Surface RT a year ago, which still culminated in a $900 million inventory writedown last quarter.
However, Microsoft had reportedly ordered between 3 million and 5 million units at the time, and outgoing CEO Steve Ballmer has since admitted that the company built too many. If Microsoft's build plans are more balanced with demand, it could avoid future possible charges. The new models are also priced slightly lower at $450, which should reduce their initial carrying value on the balance sheet.
In this segment of Tech Teardown, Erin Kennedy discusses Microsoft's Surface 2 pre-orders with Jamal Carnette and Evan Niu, CFA.