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surfaceblackMicrosoft just reported its quarterly financial results, including a $900 million charge for “inventory adjustments” of its Surface RT tablet, following widespread price-cutting after the company’s iPad rival didn’t live up to its early expectations.

The company reported earnings of 59 cents a share, when including the 7 cent charge for the Surface RT. Adjusting for that charge, the company’s earnings would have been 66 cents per share — still significantly lower than the 75 cents that Wall Street analysts had been expecting in advance of the report.

Revenue in the closely watched Windows division was $4.4 billion — a 6 percent decline after adjusting for a revenue deferral taken in the same quarter a year ago.

“While our fourth quarter results were impacted by the decline in the PC market, we continue to see strong demand for our enterprise and cloud offerings, resulting in a record unearned revenue balance this quarter. We also saw increasing consumer demand for services like Office 365, Outlook.com, Skype, and Xbox LIVE,” said Amy Hood, Microsoft’s new chief financial officer, in the company’s earnings release.

She added, “While we have work ahead of us, we are making the focused investments needed to deliver on long-term growth opportunities like cloud services.”

Microsoft’s Surface RT is the version of its tablet based on energy efficient ARM processors, theoretically going head-to-head with the iPad. Over the weekend, Microsoft dropped the price on the 32GB tablet from $499 to $349. The 64GB device also got a price cut, dropping to $449. This followed deep discounts and giveaways in the education market, in what has been perceived as a strategy to clear out inventory in advance of a new version.

Shares of Microsoft are down almost 5 percent in after-hours trading. The company’s overall revenue for the quarter was $19.9 billion, also missing analysts’ estimates of $20.7 billion.

Update: Asked about the Surface RT price cuts, Microsoft’s director of investor relations Lisa Nelson said via phone, “We believe that it will accelerate Surface adoption and better position us for long-term success,” she said. However, she declined to say whether the move was in anticipation of a new version of the Surface RT. She noted that the results also include a write-off of related parts and accessories, such as the Surface keyboards that go along with the device.

In the Windows business, Nelson said business PCs actually returned to modest growth this quarter, but the consumer market for Windows PCs continues to suffer.

Microsoft’s earnings conference call begins at 2:30 Pacific time, available for streaming here.

Follow-up: Microsoft’s new CFO concedes, ‘This journey will take time.’

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