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Microsoft's flagging Surface tablet is still losing money

Costs $109 for every $100 of revenue
Fri May 02 2014, 14:23

MICROSOFT'S SURFACE TABLETS are still losing the company money, following  the $900m writeoff that Microsoft suffered due to poor sales of the tablet last year.

Still showing no signs of driving market interest two years after release, the Surface tablets are costing Microsoft $109 for every $100 of revenue received from the devices. 

This is according to Microsoft's latest filing with the US Securities and Exchange Commission (SEC). In the filing, the figures said Microsoft's Surface tablets and accessories earned the firm $494m in the first calendar quarter. But the company spent $539 million selling them, "which increased due mainly to a higher number of units sold," Microsoft said, meaning that for every $100 of revenue Microsoft received from sales of Surface tablets, the firm spent $109.

Surface with Windows RT

Overall in the figures for the nine-month period to the end of March, total Surface sales were $1.8bn, but cost of sales was $2.1bn, meaning that the firm spent $116 for each $100 of revenue.

Despite huge marketing campaigns, such as product placement in "young people's" TV shows such as 90210, Microsoft's Surface tablets failed to catch on. People just didn't buy them, not when they sat in the computer store next to shiny, sleek looking aluminium iPads.

In its SEC filing, Microsoft recognised that Apple has taken a lead in the market without actually saying so, via a note in the filing about "competition among platforms, ecosystems and devices", which said, "A competing vertically-integrated model, in which a single firm controls the software and hardware elements of a product and related services, has been successful with some consumer products such as personal computers, tablets, mobile phones, gaming consoles, and digital music players.

"Competitors pursuing this model also earn revenue from services that are integrated with the hardware and software platform. We also offer some vertically-integrated hardware and software products and services; however, our competitors in smartphones and tablets have established significantly larger user bases," it added.

The filing admitted that Microsoft faces substantial competitive challenges from competing platforms developed for new devices and form factors such as smartphones and tablet computers.

"These devices compete on multiple bases including price and the perceived utility of the device and its platform," it said. "Users are increasingly turning to these devices to perform functions that in the past would have been performed by personal computers...the prevalence of these devices may make it more difficult to attract applications developers to our platforms."

Strangely, however, Microsoft hasn't taken a hint from poor sales of its revenue-swallowing tablets, as rumours suggest that the Redmond firm will continue the Surface brand with a Surface Mini.

Last week, an Amazon listing that has since been pulled hinted that the long-rumoured Microsoft Surface Mini will go on sale in mid-May.

Amazon US was the culprit, with the retailer listing a case for the so-called Surface Mini, along with an 18 May release date. While Microsoft declined to comment, this certainly suggests that an imminent announcement is on the cards, despite previous rumours hinting at a summer release. µ


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