Microsoft Reveals Mounting Losses For Surface Tablet

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Microsoft Surface

The company actually loses money on every tablet device it sells

Microsoft‘s hopes of establishing a sizeable presence in the tablet market continue to be thwarted, new figures reveal.

And it seems as though Microsoft loses money on every Surface it sells, despite the relatively high retail price of the machines.

Loss Leader

The revelations came in a Microsoft quarterly filing to the US Securties and Exchange Commission for the financial period ending in March.

The filings revealed that Microsoft’s Surface PC-tablet hybrid still has sluggish sales, two years after the launch of the hybrid device.

microsoft surface 2 leadMicrosoft’s filing revealed that revenues from selling the Surface and accessories came to $494m (£293m). Unfortunately for Redmond, the cost of getting those revenues was $539m (£320m). According to the Guardian, that means for every $100 (£59) of revenues from Surface, Microsoft spent $109 (£65).

In the previous quarter that ended back in December, Microsoft recorded $893m (£530m) in revenues for the Surface – but cost of revenues were $932m (£553m), so it spent $104 (£62) for every $100 (£59) of revenue.

“Cost of revenue increased $1.2 billion or 24 percent, primarily due to higher volumes of Xbox and Surface sold, as well as $159 million higher data centre expenses,” said Microsoft in its filing.

“Surface cost of revenue was $539 million for the three months ended 31 March, 2014, which increased due mainly to a higher number of units sold,” said Microsoft in its filing.

Poor Sales?

Microsoft launched its Surface tablet back in June 2012. It offered two versions, one which utilised Intel processors, and one version running Windows RT, which utilises ARM-based processors.

The later option, while cheaper, failed to gain market traction because it could not run many common Windows programs. The company also slashed the struggling tablet’s prices. Last July Microsoft announced that it had taken a $900 million (£586m) charge due to poor sales of the Surface RT tablet during the fourth quarter of its fiscal year (2013).

Indeed, the Surface device has struggled to compete in the tablet market, a fact not helped by the relatively high cost for the premium models, as well as the accessories. The company broadened the number of retailers stocking the device in December 2012, to try and kick start interest.

Earlier this year, a survey found that when it comes to a working environment, users appear to prefer Microsoft’s Surface tablets to an iPad or an Android device. Chitika analysed the tablet web usage habits of tens of millions of North Americans found that Surface users generated a slightly greater share of their total online traffic during working hours when compared to iPad or Android tablet users.

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Author: Tom Jowitt
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