Microsoft takes major loss on Surface tablets

July 31, 2013 | 08:49

Tags: #financial #surface #surface-pro #surface-rt #windows-8 #windows-81 #windows-rt #windows-tablet

Companies: #microsoft

Microsoft has finally revealed revenue figures for its Surface tablet experiment, and they make troublesome reading for those who had hoped the company may continue to push its Windows RT operating system.

Rumours have been circulating for months that Microsoft's Surface RT and Surface Pro products aren't selling, but the company has been silent on precise figures. The closest it came was the admission, in its most recent earnings call, that it was taking a $900 million write-down on unsold Surface RT inventory following a price cut designed to boost adoption of the device.

Now, however, the truth regarding just how expensive an experiment the Surface devices have been is revealed. In its latest Form 10-K filing, an annual report US companies are required to make to the Securities and Exchange Commission, the company has been forced to admit that it has made just $853 million in revenue from its Surface RT and Surface Pro devices - less than the write-down made on unsold inventory.

The revenue figures represent sales made globally between the launch of the Surface RT and Surface Pro and the end of the company's financial year on the 30th of June. While unit shipment figures do not form part of the report, the value would appear to suggest that previous estimates of around 1.5 million units sold are accurate.

The story doesn't end there, however: while $853 million in revenue - not, it must be remembered, profit - for an at-the-time unproven entry into a seemingly saturated market may seem relatively impressive, it fails to even cover the cost of advertising; according to the document, Microsoft's advertising budget rose $898 million over the financial year as a direct result of a marketing push for Surface RT, Surface Pro and Windows 8.

The form does not detail the margin Microsoft makes on each Surface device sold, but even at a 50 per cent mark-up - which the company would be hard-pushed to achieve, given the hardware and retail price - it's obvious that the company's foray into the tablet market has been an expensive loss.

Previously, it had been claimed that Microsoft was looking to launch a refreshed Surface RT device in the coming months - but given these figures, coupled with the announcement that its hardware partner Asus is to join others in abandoning the Windows RT platform, few could blame Microsoft if it decided to bury the Surface line altogether.
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