It’s Official – Microsoft Loses Money On Surface Tablets

An annual report by Microsoft has revealed that the Surface RT and Surface Pro tablets have so far failed to make any profit. The two devices have earned revenue of just $853 million (£561m), compared to $900 million (£592m) in unsold Surface RT units the company had to write down.

The tablets have hardly set the world on fire, despite a ten percent increase in marketing budget, most of which was spent on promoting Surface RT and Windows 8. Microsoft also blamed the tablets for a hike in its production costs, reports Reuters.

Earlier this week, CEO Steve Ballmer admitted that Microsoft “built a few more devices than we could sell.” A few days later, Asus CEO Jonney Shih told AllThingsD that Windows RT, the version of the OS designed to run on ARM processors, “is not very promising.”

Stating the obvious

Surface RT, the first computer built by Microsoft from the ground up, was released on 26 October last year. The device gathered mixed reviews: some praised its original design, build quality and extensive hardware features, while others criticised confusing marketing and the inability to run traditional x86 applications on Windows RT.

The device failed to excite the market, and as part of its quarterly results, Microsoft recently announced the write-down of $900 million worth of tablets sitting in its warehouses. The company also cut prices for Surface RT in its stores by a third.

It was a different story with Surface Pro, which was officially launched in the UK in May. This PC disguised as a tablet was generally well-received and even caused stock shortages in the US. However, the hefty price tag and distrust towards Windows 8 had resulted in sluggish sales.

Now, it emerged that Microsoft’s hardware project brought in just $853 million in revenue, confirming what many analysts thought – Surface is not bringing in the bucks. In fact, it’s doing the opposite.

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