Surface damage mounts at beleaguered Microsoft as losses surpass $1.7 billion

“Microsoft continued to lose money on its Surface tablets throughout its just-concluded 2014 fiscal year, adding hundreds of millions of dollars in red ink and boosting total losses to $1.7 billion since the device’s 2012 launch,” Gregg Keizer reports for Computerworld.

“According to the 8-K statement filed with the U.S. Securities and Exchange Commission (SEC) on July 22, the Surface posted revenue of $409 million for the quarter that ended June 30. But unlike the two quarters prior, Microsoft did not reveal the cost of revenue associated with the Surface for the period,” Keizer reports. “Without a cost of revenue figure, it is impossible to calculate a precise gross margin, a rough measurement of profit. However, using information in the 10-K that Microsoft filed last Friday, along with data from earlier reports, it is possible to estimate Surface cost of revenue.”

Big Dummy Ballmer“Calculations by Computerworld show that the Surface’s cost of revenue for the June quarter was $772 million. With revenue of $409 million, that put the tablet in the red to the tune of $363 million, the largest one-quarter loss for the Surface since Microsoft began providing quarterly revenue numbers,” Keizer reports. “Since the Surface’s sales debut, Microsoft has lost $1.73 billion on the new hardware.”

Read more in the full article here.

MacDailyNews Take: Microsoft’s Surface is the grift that keeps on grifting. 🙂

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48 Comments

  1. Surface 3 nails it! No worries for MSFT whatsoever as 5 million software titles dwarfs any other platform. My iPad Air is just a toy compared to my Surface 3! Incredible device to say the least.

    1. how many of those titles optimized to run with touch interface? If they are so good how come they are not selling?

      the Surface 3 is like a company duck taping an Old Truck Engine to a limp framed motorcycle and saying “see! see! We’ve got the best of both worlds!” It’s neither a good truck or a good motorcycle.

        1. “understand what Surface 3 is ”

          I understand EXACTLY what it is: a piece of crap.

          like truck engine motorcycle it does not even go well DOWNHILL…

          Msft invented Win 8 NOT because it was good for the consumer or great product but BECAUSE IT WANTED TO PROTECT IT’S CASH COW: WINDOWS DESKTOP. So it got to DESKTOP Division (instead of the MOBILE Win Mo division) to build the MOBILE OS and glue the two mismatched pieces together with duck tape.

          Internally they killed of Win Mobile, Win CE, Pink, Kin OS (Danger OS) Zune OS , Courier, original Win phone etc. which was controlled by the MOBILE division (Entertainment and Devices Division ). One of these could have been a BETTER MOBILE OS but Msft needed to protect it’s DESKTOP cash cow.. so users are damned with Motorcyle Truck crap.

          On the other had apple HAD THE BALLS and allowed the iPhone to supplant the iPod their biggest money earner (and not have an ‘iPod phone’ but start from scratch) BECAUSE THEY WANTED TO BUILD THE BEST MOBILE EXPERIENCE FOR THE USER.

          1. to amplify the reason why Msft wanted the Desktop Windows to succeed is that they made a lot more money off the Desktop OS than Win Mo.

            besides greater volume they also traditionally charged a lot more for the Desktop OS than Win Mo to OEMs (look at the Win Desktop cost to CONSUMERS about $100 for the crippled Home edition upgrade ). Msft had great incentive to somehow keep the Desktop gravy train alive. But all their plans including fees they can charge for the OS seem to be floundering.

          2. When M$ first released Win 3.1 and Office they bundled it to every PC builder to gain market share knowing that upgrade cycle would generate revenue. Their domination of the workplace followed.
            Apple have now chosen to give away upgrades on an annual basis and gradually lift the hardware spec needed to run the latest offerings – so you know what it is you are missing before you shell out for a new machine. This model is set to kill the M$ cash cow and Surface is just an irrelevance.

        2. M$ hasn’t made anything since the Xbox worth anything, and that’s being kind to Xbox.

          Besides, you’re the ass for calling the iPad a toy and begging for a fight. Just remember, the Surface wouldn’t even exist if Apple hadn’t come up with the iPad first. Microsoft STILL doesn’t get it though because they’re trying to shoehorn their POS into the laptop space, like their old terrible “tablets” from the early 90s.

          Same goes for the smartphone industry. I don’t see anything looking like a Blackberry anymore, they all look like iPhone wanna-bes. Apple has been the only company in the last 10 years that has been turning whole industries upside down.

    2. By your definition, Microsoft had already “nailed it” 10 years ago with their ill-fated Tablet PC (and Windows XP Tablet PC Edition). Surface 3 is merely a regurgitation of that effort, albeit with a bit more of a spit shine on the UI. Unfortunately, only about 0.01% of those 5 million titles are actually optimized for a touch interface, which makes the Tablet PC 2.0 (AKA Surface) just as cumbersome to use as it always was. Those who don’t learn from their mistakes are doomed to repeat them – and unfortunately (or fortunately, for Apple), Microsoft has a very short memory.

  2. It might have made sense to drop the Pro which is nothing more than a laptop and screws with their primary OS, and concentrate on making Windows for Phone and Windows RT mutually compatible. This would have created a mobile strategy and would involve copying, which is right up their alley.

    A mutually compatible phone and tablet OS strategy works well for Apple and Android, why reinvent the wheel, particularly when you’re not very good at inventing?

    1. I disagree,

      The Pro is the only PC as a tablet on the market (other than a handful of other Windows based units). While the PC as a tablet is a niche market, at least it’s something Microsoft could own.

      The technology for this is rapidly evolving, many of the limitations of the Pro (battery life, size, weight, etc..) will be phased out by newer tech.

      The RT version is the one that doesn’t make sense to me. It doesn’t run full Windows and all of its apps, and in order to find success will need to build a full ecosystem which won’t come unless it’s already successful.

      Really, Microsoft should kill all of its mobile devices and focus on developing products and services for other platforms.

      1. Well, they already own Nokia so they should pass the ball to them to come up with a compatible tablet. The surface seems to be sinking, so dump that and see what Nokia engineers can do without Redmond interfering too much.

        BTW, wasn’t the Surface pro just sort of a guideline for the third party manufacturers MS wanted to sell more copies of Win 8 to? I see advertisements for laptops with detachable keyboards all the time. Are these appreciably different from the surface pro?

  3. Microsoft markets it as the best of both worlds, with a dancer that prances around in fantasy land… In the REAL world, it’s a compromised tablet that tries to be a compromised laptop.

  4. Microsoft keeps building their OS for their own ideas of what is “right” rather than finding out from real world users.

    As a consequence they produced the Surface, years late, with an OS consumers hate.

    Consumers determine the fate of tablets, not the IT departments of large companies. Consumers who get burned once, buy the right product on the rebound.

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