Microsoft CEO Steve Ballmer reportedly conceded that the company overestimated its Windows RT expectations and made too many of the tablets.
"We built a few more devices than we could sell," said Ballmer at an internal town hall meeting this week, according to sources who spoke to The Verge.
"A few" might be an understatement considering Microsoft's disclosure that it had to make an inventory write-down of $900 million (about £585m, AU$971m) due to Surface RT.
Ballmer is said to have admitted that the nearly $1 billion loss was a huge hit for the company, but one that was necessary to sell its Surface RT tablets.
Sour on Windows 8 sales, too
Surface RT wasn't the town hall meeting's only whipping boy. Ballmer also mentioned his disappointment in Windows sales as a whole, according to the sources.
"We're not selling as many Windows devices as we want to," he said, according to the report.
Ballmer was reportedly referring to Windows PCs as well as smartphones and tablets with the company's operating system on them.
Ballmer hints at Surface 2?
The townhall meeting sounds like it wasn't all bad news for Microsoft.
Ballmer is said to have confirmed new devices being tested with incremental improvements, which could of course mean that the Surface 2 tablet is on its way.
The company is speculated to update its Surface Pro tablet with a Qualcomm's Snapdragon 800 processor and better battery life.
Then there's the constant speculation that a Surface mini tablet will join the fray to compete against Apple's 7.9-inch iPad mini.
When it comes to solutions for Windows, the report mentions that Microsoft is hedging its bets on "back to school" sales and the holidays to move more Windows 8 and Windows 8.1 hardware.
- Read how to get the new Nexus 7 early starting today, a.k.a. more trouble for Microsoft's tablet line.