Wal-Mart Quickly Closing The Gap To Become World's Largest On-Line Retailer

Staples shares plummet -- down almost 13%.

Shares of Staples are getting reamed this morning after the struggling office supply retailer announced first quarter earnings fell short of analyst estimates and cautioned for the current period. For the quarter ending May 3 Staples said it earned $0.18 on $5.65 billion in revenue. Wall Street had been looking for $0.21 on $5.61 billion in revenue. Same store sales declined 4%.

Staples says it expects to earn somewhere between $0.09 - $0.14 in the current quarter compared to a $0.15 average estimate.

Guiding lower is becoming a quarterly event for Staples. In March the company announced plans to close 225 of its U.S. stores. As of this morning Staples says 80 of those locations will be shuttered by the end of the current quarter. About the only positive during the period was 6% growth at Staples.com. Staples is still the second largest on-line retailer in the world though Walmart is quickly closing the gap.

I track the demise of the Big Box stores here. 

The big story here, however, is not that another big box store is in trouble. The big story is that Wal-Mart, which stereotypically does not cater to internet-savvy consumers, is quickly closing the gap to become the world's largest on-line retailer. I have trouble believing that but that's what it says, and if it's on the internet, it must be true.

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... and the end is near for Surface, too ...

From Yahoo!In-Play:

Microsoft announces Surface Pro 3; starting estimated retail price of $799: Co introduced Surface Pro 3. "Surface Pro 3 is a tablet and a laptop: multiple processor, RAM and storage options intersect with a sleek design that, with a simple snap or click, transform the device from a perfectly balanced tablet to a full-functioning laptop and back again - all in a beautiful package that is 30 percent thinner than an 11-inch MacBook Air. Its stunning 12-inch display and new, continuous kickstand provide the screen real estate and multiple viewing angles people need for work and play. And the new Surface Pen - completely redesigned with form and function in mind - delivers a precise, luxurious drawing and note-taking experience with a single click of the pen."

Starting at an estimated retail price of just $799, Surface Pro 3 will be offered in multiple configurations featuring 4th-generation Intel Core i3, i5 and i7 processors. Surface Pro 3, Surface Pro Type Cover and Surface Pen will be available for pre-order2 starting May 21 at 12:01 a.m. EDT through Microsoftstore.com, Microsoft retail stores and select third-party retailers. Commercial customers should speak to their authorized reseller.

Computerworld.com is reporting:

Microsoft has lost more than $1.2 billion so far on its Surface tablet business, an expensive experiment that makes tomorrow's revelations of new hardware an important milestone for the "devices" side of its corporate-refashioning strategy.  

While analysts and observers have split on Surface's future -- some see Tuesday as a last-chance for Microsoft to tweak its tablet strategy, others believe the company will press forward regardless of the reception pundits give the new devices -- it's a no-brainer that eyes will be on Nadella, who will have to explain how he will push, pull and drag the Surface out of its money-losing ways.

For although Microsoft has been parsimonious in the details it declares of the Surface's financial performance, the business has clearly been a money pit. In the last two quarters -- the only ones in which Microsoft has explicitly called out revenue and cost of revenue -- the tablet line lost $84 million.

Reuters:

Microsoft Corp's Surface tablets have yet to make any profit as sputtering sales have been eclipsed by advertising costs and an accounting charge, according to the software company's annual report.

The two tablet models, introduced in October and February to challenge Apple Inc's popular iPad, have so far brought in revenue of $853 million, Microsoft revealed for the first time in its annual report filed with regulators on Tuesday. 

That is less than the $900 million charge Microsoft announced earlier this month to write down the value of unsold Surface RT - the first model - still on its hands. 

On top of that, Microsoft said its sales and marketing expenses increased $1.4 billion, or 10 percent, because of the huge advertising campaigns for Windows 8 and Surface. It also identified Surface as one of the reasons its overall production costs rose. 

The Surface is Microsoft's first foray into making its own computers after years of focusing on software, but its first attempts have not won over consumers. By comparison, Apple sold almost $24 billion worth of iPads over the last three quarters.

 I can't find the article now, but it appears tablets are going to be challenging for all companies: people hold onto their "old" tablets longer; they don't need upgrading or replacing as often as phones or even laptop computers.