Microsoft Corporation (NASDAQ:MSFT) has a lot riding on its Surface hardware division. However, over the past several years, the company has been facing an increasingly vocal group of Surface Pro 4 owners who claim their tablets are defective and suffering from screen issues.

This so-called “Flickergate” has been resulting in bad PR for the company, and MSFT has finally blinked. A Surface Pro 4 replacement program has been announced, offering a no-cost solution for owners of affected machines.

Flickergate

The Surface Pro 4 was launched in 2015 and represented a significant improvement over its predecessor. This was important for MSFT because by this time, Microsoft was facing serious competition from Apple Inc. (NASDAQ:AAPL) and its new iPad Pro.

As it expanded its hardware ambitions, products from the Surface line gained more importance for MSFT stock. There was a real risk of the iPad Pro moving in on the market for premium tablets for professionals that the Surface had created.

I reviewed Microsoft’s latest prosumer tablet and found it was a solid choice, especially its impressive display.

However, that same PixelSense display has become a thorn in MSFT’s side. A year after release, some users began to complain that their expensive tablet’s display was flickering, rendering it unusable. Microsoft released a firmware update that was supposed to fix the issue, but the complaints continued.

Since most of the affected devices had passed their one-year warranty coverage, owners were out of luck. They began posting temporary solutions like taking a hairdryer to the Surface Pro 4, or sticking it in the freezer to get a few hours of use before the display began acting up again. Others bit the bullet and paid for an expensive screen replacement.

Flickergate was born.

Microsoft Blinks

After the initial attempt at a software fix, then charging some customers $450 for a replacement display, MSFT has blinked. On Friday, the company announced a Surface Pro 4 replacement program.

Affected owners will have their tablet replaced with a refurbished version for free, up to three years from the original purchase date. In addition, customers who paid for an out-of-warranty repair on their display will be eligible for a refund.

For all intents and purposes, it appears that Flickergate is over, and Microsoft’s customers have won the battle.

Why Did MSFT Finally Cave?

Microsoft’s bet on its Surface hardware is beginning to pay off, and that additional revenue is becoming relevant to the company’s bottom line.

In its Q3 earnings report, MSFT noted Surface revenue was up 32% year-over-year. At $1.09 billion, this marked the third straight quarter of $1 billion Surface revenue. The hardware sales are beginning to be factored into MSFT stock valuation.

The last thing Microsoft needed was for Flickergate to drag on and potentially give its entire Surface division a black eye. Not good for sales, not good for MSFT stock.

Admitting there was a hardware issue and spending the money to fix it was probably the best course of action at this point. Yes, it shows there was a design or manufacturing flaw, which could make potential Surface buyers think twice. But by standing behind its product with the Surface Pro 4 replacement program, MSFT makes existing customers happy and more likely to buy again.

There’s also been precedent set in this area. Apple has had several replacement programs for its MacBook Pro, including one that was offered for up to four years after purchase. That admission of a defect in its flagship laptop didn’t stop Apple’s Mac sales from outperforming rivals in a declining PC market.

Now that Microsoft has admitted to a defect and has launched the Surface Pro 4 replacement program, Flickergate should fade from the headlines. And the company can move forward with its Surface hardware ambitions, free of distractions.

As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.