Chitika: Surface Users Generated More Tablet Traffic Than All Google Nexus Tablet Users

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Tablet Marketshare US

This is a good news for Microsoft. Following the poor sales of first generation Surface RT devices, Microsoft reduced the price of the device by almost half and sold it through various retailers in the US. As a result, the number of devices in consumers hands has increased significantly. From the latest data of online ad network Chitika, Microsoft Surface and Amazon Kindle grew their tablet market share over others. In fact, Surface usage share was more than that of Google Nexus tablets.

Microsoft’s Surface lineup also continued its impressive year end run. Surface users generated more tablet traffic than all Google Nexus tablet users following the holiday, making Microsoft the fourth-largest source of continental tablet Web traffic should it maintain the lion’s share of this latest share growth.

How Chitika came to this number,

To quantify this latest report, Chitika Insights surveyed a sample of tens of millions of smartphone and tablet online ad impressions from the Chitika network. This study was drawn from a date range of December 20 to December 29, 2013, and only includes Web traffic generated within the U.S. and Canada.

Source: Chitika

About Author

Pradeep, a Computer Science & Engineering graduate.

  • V.A.N.

    Well this is not surprising given the fact that the new users are using their cheap Surface tablet during the heart of the Christmas season. It’s like buying your first car and driving cross country with it.

    • NicolaMantovani

      Uhm, this is a tablet to tablet comparison, and google’s offering is still cheaper than an original surface with its price slashed.

    • whatup12

      and you know that there is a statistically significant increase in the relative new surface purchases vs other tablet purchases how? most common purchases were not surfaces this season…so this would argue against your cruise control theory. but thanks for coming out.

  • Jeff Hung

    As many websites still don’t support touch browsing very well (and many “mobile” version websites only serve dumb-down information), Surface (and other Windows 8 family tablets) provide a very pleasant web browsing experience. A user can always flip out the touch cover or put the keyboard dock on to deal with those mouse-only web pages.

    • LexicoRed

      WTF – I have done 99% of my web browsing for the last year on my WP 920 and only found handful of “mouse-only” sites, and those were low rent bad site not worth visiting.

      So I call BS on your post!

      • Jeff Hung

        Good for you. It’s your browsing selection.

  • Pingback: Chitika: Surface Users Generated More Tablet Traffic Than All Google Nexus Tablet Users | WMPoweruser

  • J88NYr

    Is this actually surface vs nexus, or all W8.1 tablets vs all Android tablets?

    • Bugbog

      The line of difference may well be very blurred here, as the Nexus 7 IS one of the best selling Android tablet lines available. (Coupled with the fact that it has been available for longer and far cheaper too!)

      • Viktor

        Nexuses are not best sellers. Check your facts.

        • Bugbog

          I think You should check Your facts.

          Whilst the majority of Nexus devices are not well known (and the Nexus 10 was a Massive flop on most levels), and only Android users are really aware of the Nexus Phones, the Nexus 7 has achieved a certain level success, not only to the technically aware, but also the general public. It is widely available, and has the distinction of being the watermark for inexpensive [relative] quality mini Android tablets.

          I think by anyone’s standards that is the definition of success!?

          • Rikkirik

            Availability and being watermark for inexpensive tablets do not make the Nexus a succes. Recent data show that Google sold 1.7 million tablets and Chromebooks in the first 11 months of 2013. Yes Chromebooks and tablets, a disgracefull amount. Nexus tablets, Chromebooks and Nexus smartphones are a BIG flop. With Windows tablets becomming inexpensive also I do not see the need for a Nexus tablet nor a Chromebook (which essentially is nothing more than a tablet with a keyboard).

          • Bugbog

            Don’t confuse acceptance of the fact that the Nexus 7 is somewhat well known and successful with anything else!

            I think all MS followers know that there is a double standard with Microsoft products when compared to others. Where for one producer a shifting of 3M units would be regarded as a moderate success, for Microsoft is regarded as a failure. The fact that the Surface RT may well have sold as much or more thatn the Nexus 7 still doesn’t stop the naysayers from trying to tar it with the “failure” brush. What is acceptable as a smart move for one firm is regarded as a sign of failure on Microsoft’s part.

            So yes, the Nexus 7 may well have shifted less than 2M units in a 1yr period, but it is still regarded as a success for Google regardless. The same way Chrome, with less than 18% marketshare is regarded by the tech populace as the “winning/must-have” browser, irrespective of reality!

            Just clarifying a few things here.

          • Mark Gibbs

            I don’t understand why hardware companies are putting so much money into chrome books, look at HP they are dumping thousands of workers and saying its due to PC Sales, but they are spending all their focus on Chromebooks. I ordered 10 HP folio laptops in November and just received them. !! they are not focused on windows devices and I have no Idea why … It can’t be licensing because they just pass that on to the consumers .

          • Viktor

            Nexus 7 is a relatively successful tab. Relatively to other first tier manufacterers tablets, that have any press

          • Bugbog

            See response to RikKirik below.

          • NGM123

            The original Surface smokes the Nexus 7, I have both.

        • Martyn Metalous

          I got the wife a Nexus 7, she wanted one, bloody thing is useless for browsing or playing games (majority of games are just rubbish) so she has gone back to her Dell notebook/tablet and uses that instead because it just works ;)

      • donzebe

        This is what customers have been asking this holiday:
        Ipad
        Surface
        Tablet

    • Viktor

      Do you know operating system called Samsung?
      Microsoft is a manufacturer here, so only surfaces, not all win tablets.

  • Ryan

    Does this take into account the ‘use desktop mode’ setting with Android? I always use full desktop mode on my Nexus 7 and it seems to register on websites as if I were on a regular Linux desktop/laptop.

    • Socius

      Websites read what browser you use, and also what OS you’re running on. Desktop mode identifies the browser as being something else. But the operating system remains the same.

      • https://plus.google.com/u/0/115605168398121887465/about Anzhel Bozhinov

        In Desktop Mode Android changed to X11; Linux x86_64.

  • NGM123

    I’m not in the U.S but doing my bit for the Surface internationally.
    The original Surface was on sale here in Aus for $220 so I bought 4 for Christmas presents, 1 for me.
    First time I’ve used one, staggered how good this thing is and my family love them also, my apple loving teenage daughter thinks hers is brilliant. @ $220 a screaming bargain, I can’t understand the negative press, my Surface is awesome. MS should keep producing the original Surface as an entry level unit, at this price point they are onto a huge winner. I previously owned a Nexus 7 and an iPad, my Surface kicks them both to the curb by a massive margin!
    I’ve openly criticised W8 on a normal PC, but W8 on the touchscreen is nothing short of absolutely amazing.
    Had to do a work project from home yesterday, plugged in the mouse, used Office to create the project, emailed it in, then back to my casual usage, did I mention this thing is brilliant??…… and there’s the thing, I needed Office for my laptop, cost $110 or buy a Surface with Office included for $220, an absolute no brainer. Kudos MS, this is an amazing product at the price.

    • NGM123

      Also, people were lining up to buy it at the price, I waited in line and missed out on the original pre Christmas release but was first in on Boxing Day with some late Christmas presents. Sold out again in a few hours so the sweet spot price point is there for this quality item.

      • SategB

        But you can’t get that product quality at that sweet spot price point without a $900 million write down. After a few of those, they start to add up to real money losses

        • whatup12

          this is about introducing a new product…if they need to take a lesson from google or amazon’s book and sell the product at a loss to get people using it, then so be it. It was sunk cost anyway. The surface 2 remains out of stock at MSRP in most places which just means they didn’t make enough. and there are no sales on it other than the standard 10% university discount.

          • SategB

            MSFT does not have the business model where they can increase revenues by selling hardware at cost like Google with advertising and Amazon through retail sales. For Microsoft selling at cost mean going out of business.

            And like you said New generation out of stocks are a supple side issue not demand side issue. So true sales potential is a unknown but seeing how few MSFT built for the holiday season strongly suggest even the company does not have faith in the product.

          • whatup12

            Actually, MSFT business is based on getting people to warm up to using their newly developed OS (still using office, internet explorer, skydrive). Ie, they just needed to get the product in people’s hands and sold them cheap to do this. and they are increasingly a service and devices-based company–and the surface is a great platform to deliver their services. and delivering these at a loss worked in terms of generating sales. The test of the strategy will be whether these people stick with the surfaces moving forward bought at retail.
            Any product that has ever been made that is out of stock is a supply side issue. But thanks for your valuable insight :). Neither you or I have any idea of how many were bought this season…I hope that many were bought, you clearly hope not.

          • SategB

            Simply not an accurate position. A company that depends primarily on software for revenues does not benefit from lossing money selling hardware and software at cost when they are still dependent on OEMs to buy said software and sell product at a profit.

            Your also wrong about my wishes for Surface sales. Our difference is I can be realistic and see it to be a failure while you want to believe that company continuing a failed strategy as being good for the company.

          • whatup12

            Your oversimplification of Microsoft’s revenue streams is painful at best and embarrassing at worst. Microsoft now generates revenue by selling subscriptions of office, charging companies for the use of Azure (which tends to be more commonly used for products run on windows), searches run through bing which is baked into win 8.1 (based on advertising sales), and so on. Again, it is your lack of thought into how Microsoft makes money that explains ignorant responses…and for that you can be forgiven!
            And about your second point, I indicated that i don’t know about the success or failure of the Surface 2, but you seem to be using magical powers to know. I wish you the best with your magical powers–they are surely serving you well in life!

          • SategB

            Actually MSFT revenue streams has enjoyed greater diversity over the last few years while conversely operating income is still being driven primarily by Windows and Office products resulting to them being 75% of bottom line figures.

          • whatup12

            “The Servers & Tools division, which focuses on enterprises, grew 9 percent to $5.19 billion in sale”

            “The Business Division, which handles Office and related business tools, reported a pro forma revenue increase of 3 percent. That takes into account various upgrade and pre-sales offers for Office. Without taking them into account, sales were down 10 percent, to $5.69 billion”

            “As for the Windows division, it showed suprisingly strong results, $5.88 billion in revenue, up 24 percent compared to a year earlier”

            The Online Services Division reported revenue of $697 million, a 9% increase from the prior year period.

            The Entertainment and Devices Division posted revenue of $1.95 billion, a decrease of 1% from the prior year period.

            in other words, you are simply and completely wrong. servers and tools made nearly as much as windows division. and bing earned 700 million this quarter.

            In total for FY 2014 Q1, Microsoft Reports Record First-Quarter Revenue of $18.53 Billion. For your reference, that is more than google earned.

          • SategB

            As I previously stated and agree with you on that MSFT has broaden the color of the companies revenue stream through a greater normalization of divisional activities though EBIAT is still heavily weighted by the legacy product we all love and use. I will add a mention of the much agree upon point of the downward pressure that heightens the opportunity cost of negative cash flow strategic initiatives.

          • whatup12

            11 billion out of 18 billion is about 60% or so. that means that now 40% of their revenue is from non-traditional sources (ie not legacy products). And of that, at least part of the office revenue is from subscriptions of office as compared to purchased product. ie, that is a gift that will keep giving if people keep using the platform.
            Your vernacular is that of a trader/analyst. I get that and indeed, not my line of work necessitating some searching for acronyms used. But we do agree that Microsoft has to take some risks even if they will lose money on it at first–that is what i said in my first post in response to this blog post. And I would gather that this is what you mean by “downward pressure heightening opportunities for negative cash flow strategic initiatives”.
            ie in simple person lingo: take some risks :).

          • Guest

            It really is a simple enough statement; that the weakness of the PC market and Windows makes the risk of money losing projects a large threat to the company.

            Indeed Microsoft should having been doing these things ten years ago. It is no longer intelligent for them to be doing it now as their profit makers deteriorating. This is why Elop says it time to sell of Xbox and Bing u guess.

          • whatup12

            How are their profits deteriorating–they made more money last quarter than ever before. In this forum, we are trying to move away from ill-informed opinions and focus on facts. Ie, please let me know how “their profits are deteriorating” when they made more money than google last quarter.

          • LexicoRed

            I think the confusion here is your talking revenue while the other poster is talking profits. So your both right, MSFT has increase the revenue of in more divisions. He is right that even though that more divisions are contributing to revenue, the profits from those revenue are still primarily as a large percentage coming from Windows and Office.

          • whatup12

            Thanks–can you send link that shows this? I understand difference between revenue and profit–ie expenses. But can you send detailed earnings report that shows the profit as I was unable to find with a scan of the literature.

          • LexicoRed

            Disqus does not make it easy but here you go:
            http://read.bi/1ed5zjM

          • whatup12

            I know–i have had way too many comments moderated (and then deleted) because of even including things like best buy dot com. It was a really interesting read–thanks! but don’t see where in this article, there is any mention of sources or profit or revenue for msft. If sending links are tough, maybe just tell me where this was done or how to bing/google it, and i can find. Thanks!!! :)

          • LexicoRed

            Wrong link, I will just post the graph as a image.
            As it shows while the drop in Windows if coming from PC sales suffering all and all the other poster is correct

          • whatup12

            Thanks and helpful! It does look like server and tools making more than windows, but indeed, office software is crucial. As they move to a subscription model, i hope that this keeps being good for them! also looks like room for growth…

          • LexicoRed

            Yes and it also show how dependent the company is on Windows growth. It is good to see servers and tools slow growth the other poster is right to the fact the company is really dependent on Windows and Office.

            The more I look at it I see why why people are talking about selling of Bing and Xbox, they really are money losers. As a Xbox owner it would upset me but from a business perspective only an idiot would argue with it.

          • whatup12

            Well, I might be that idiot :). I don’t own an xbox, but it was released today that they have sold 3 million in a matter of 5 weeks or so. While the profit margin on these are slim, they do function as content delivery machines and also warm people up to live tiles, and the platform more broadly. Again, I am not a business man by profession, but it seems that Microsoft should be diversifying its portfolio or they may find themselves in 10 years when it is too late to do this. They should also be thinking long term–and not be focused on what happens this month or even this year. they have money in the bank now and it is a ripe time to experiment. If they find themselves in 10 years constantly working at a loss, then that money will just be enough to keep the company alive while they look for other suitors to buy pieces. (a la RIM).

          • LexicoRed

            In time they may make money as material prices drop but BOM is at $471.

            I am sure right now it is a loss with each unit sold, the message from Microsoft to the contrary is just the usual Corporate PR bs. Thanks to Android patent payments they will help cover the losses, or at least until I get my new Xone

          • LexicoRed

            Here is the BOM, so I don’t get beat up like the other poster for not offering FACTS :D

          • whatup12

            Totally agree–knew the profit margin was slim similar to PS4. Remember, when this was released a few months back. But as you say, the profit margin should go up and there are other ways to make money off these once in the home ie greater usage of Azure (Servers), people considering using other new MSFT platforms, games, etc.
            but indeed, don’t facts make conversations like this sort of worthwhile even though we have never and will likely never meet and even if we did, we wouldn’t know it. :)

          • Guest

            How ironic it is for you stating the the up side to losing money on XBox will encourage people to use Microsoft other platforms when it is just an OPINION.

            The fact is the company has sold pervious generation at a loss for years and anything people are moving away for Microsoft to other competing platforms.

            Please stop stating options pretending they are FACTS!

          • whatup12

            Actually–i didn’t pretend that these were facts there Perry Mason. they are only my opinion. when other state things as facts, i ask them to prove it. of course, it is an opinion…how will i know if using an xbox will make people buy other platforms. I am sure some market research on this has been done, but if so, i am not aware. so yes, an opinion.
            besides, they have sold 3 million of these in 5 weeks and have made money on this.

          • Guest

            @Whatup12
            Prove they made money or is that another opinion you are trying to pass off as a fact…:

          • whatup12

            ok–so a quick check of Microsoft investor relations tells us that jan 23 is when fy 14 q2 will be released. but from last one i can pull up

            Entertainment and Devices
            Revenue: $9,593,000,000
            Operating income: $364,000,000
            now we don’t know how much of this comes from licenses by android and likely has other sources other than xbox as well (while i love my l1020, we can assume that the license fees that they earn of wp is minimal for now :( ). but there is nearly 10 billion in revenue and 364 million in income.
            so they have eared 868 (3.1 million times 28$) million or so in revenue up until the end of dec 2013, but have to split this with retailers (and we don’t know how much they are paying per unit, or do we??). and obviously they had marketing costs here, etc. but they also are making money from the kickbacks from the games which are not included in the 868 million and then the other components that they are monetizing from xbox sales.
            all in all, they are up on xbox. not a huge amount–but it does play into their vision of devices and services company…so that could hold some intangibles as well.
            i am wasting way too much time on disqus lately. :)
            an other “Facts” that i provided that irk you?

          • Guest

            Dude your just throwing out numbers that are not even pertinent to the XBox One sales just trying to hide the truth you don’t know and only stating your opinion.

            Maybe just admit your full of it…

          • whatup12

            dude…are you talking profit or revenue? please specify hero of mine.
            what was BS about saying that they have sold 3.1 million and made money on this? what was BS about saying that with each one sold it was 28 bucks but we don’t know how much of that goes to MSFT? what was BS about saying that indeed, we don’t know the final numbers here until jan 23, 2014. ie, 17 days from now. tell me what was BS specifically and it will be helpful for my education.

          • Guest

            Dude how ignorant are you?
            If BOM is $471 there us no way MSFT making money on those 3.1 million units. You telling me your not smart enough to know Retail is making their ~15% margin on the units!!!
            $499 less 15% = $425. That only is a $46 loss on each unit MSFT ships AND this dies not even include Advertising, Distribution and Support expenses.

            So what is it your full of BS or just ignorant. Better yet stop trying to sound like you have a clue by googling a few key words and actually take a few class on business. I’m tired you being my special ed student.

          • whatup12

            Ok–fact time. give me citation that shows the 15%.

          • LexicoRed

            I game to say he is right about this, or if anything may be a bit low. Best Buy Gross Margin is about 25%

          • whatup12

            talked to my brother tonight who works at best buy HQ in Canada. He verified best buy margin on laptops is miniscule and they make money from selling warranty (geek squad), etc. better on cameras. high on video games. used to be high on CDs (when they still sold them), and high on DVDs. he didn’t know for xbox one. but the clue is always what employee pricing is and employee pricing for xbox is 15 bucks less than retail. so, no, 25% or 15% is not standard across product lines. stop oversimplifying what are actually complex pricing decisions.

          • whatup12

            and i was in school for way too long to go back now…but we all have our specialties. am i standing in front of a class teaching business? no…i am on a website for people who like windows phones talking with random strangers. so not exactly evidence of thinking that my time is much worth…no offence to you…i am sure your time is worth a LOT! but anyhoo, relax and send over that citation telling me that retailer is getting 15% off the Xbox. I imagine that retailers have complex relationships with providers that vary by product, etc. For example, MSFT is paying a general fee to best buy and future shop to set up their mini-store in there. Do they pay 15% on top of that? or is that in your 15%? I would also imagine that some retailers will take less than the 15% if they want to carry the product as they think that it will bring in people to buy higher margin items, like games, etc. But here, look at me, using your 15% number as if it was a fact. So please, send me something validating 15% for the xbox.

          • SategB

            @Guest please understand that nohone has every right to state his opinions, no matter how ironic you believe them to be.

            A bit of civility is benifical for all of us to practice if we are really tring to learn form each other.

          • SategB

            BTW;
            Supply side shortage = Company can but chooses not to make more product

            Demand side shortage = Company’s production is at maximum and can not meet demand.

          • whatup12

            Wow–thanks for the microecon lesson. :)
            Every company has to make an informed decision based on what projected demand is going to be based on a series of different inputs including the opinions of internal staff and external consultants. MSFT underestimated demand–and that is both a good and bad thing. It is good in that it sold more than the beancounters hired by the company expected and bad in that they didn’t get as many out as they could have. Similarly, Apple could have made more gold iphones if they had believed that these would be a success. Indeed, who knew that people would be so douchey as to want a gold phone…but then again, with the type of people who still like buying iphones, i guess the answer is yes. Neither you or I have any idea of what the number of surfaces sold this season was and thus cannot decide whether or not it was a successful season. Besides–the platform “Wars” have just started and will be settled in the order of decades, and not years or quarters.
            But again, thanks for the lesson in microeconomics–from your insightful comment I can infer that you are a professor at Wharton or the President of McKinsey.

          • SategB

            You are welcome, I am glad to be able to help you gain some additional context for understanding the topic, it is important to be able to use terms properly.

            Regarding Apple, while I do not follow the company as closely as it appears you do, most had absences suggest Apple sold as many 5s as their supple chain could produce and did not have excess product of any 5s colors. So they could have sold more gold but would have meant less sells of white or gray.

            Back to Surface, yes platforms will come and go but MSFT has shown that it’s stategy with this product is a failure that is draining resources for more successful strategic options that will assist not hurt the company’s long term viability.

          • whatup12

            Wow–if only you were on msft’s board, you could really help inform their “stategy”. Instead, the only “stategy” you are informing are what fast food place you will be eating at tomorrow. Microsoft is planning long term–you are looking in the short term. But indeed, thanks for the lesson…you keep at it and I am sure the Grade 4-6 students that you teach will really appreciate it.

          • SategB

            I do not understand the basis of your hostility. We both have interest in the company and want to see it succeed. We simply disagree on how it will achieve that success.

            So my friend lets leave the anger out of the conversation and lets continue your pursue truth and as always, feel free to have me clarify any economic term if needed!

          • whatup12

            obviously not actually angry about an inane conversation with a stranger on a website with zero implications to either of our lives. but do think it funny that you feel that you have more insight into appropriate strategic moves for MSFT than do the people who do this for a living. that lack of insight into your own limitations implies delusions of grandeur…and I just thought that was worthy of knocking down a peg or two. sorry if i offended…was just playing around. hope you were as well with these silly comments about micro-economics and Microsoft! :)

          • SategB

            No offense taken my friend, I was simple concern at the degree of hostility you was expressing for at the level you was exhibiting suggested that there may be way to much personal bias to be open to a more complex point of view.

            In fact you remind me of a fellow poster who goes by the name nohone who I have always enjoyed a great deal. He use to discuss points with me very emotionally. While he would use passion over logic, but in the end he reluctantly agree with my insight.

          • whatup12

            i guess the question is whether my passion for Microsoft is at odds with my logic?
            I would be happy to be convinced your insight–but I am still waiting to be…convinced by your insight. :)

          • SategB

            If you are open to be, it will be easy for you to be, but your repetitive aggression suggest openness is not there.

            I wish you well my new friend :)

          • whatup12

            You see a comment like “If you are open to be, it will be easy for you to be” in reference to me being convinced by your insight is just kind of a “douchey” comment. In fact, I am rarely convinced by any “insight” in life…but am generally always convinced by fact. So less insight, and more fact…and we will get along great :)

          • whatup12

            PS–there are plenty of unsold 5S–most places are selling them at major discounts during this season. which is kind of unprecedented for iPhone releases. ie, the honeymoon is over.

          • SategB

            Again, I primarily focus on MSFT with my investments, so this iPhone honeymoon you speak of is little interest of mine.

            Microsoft success will be driven by how well the company manages it assets not how well other companies manage their own.

          • NGM123

            Yes, but a big part of that write off I’m guessing was product planning and production, a one off that now it’s been written off should mean cheaper prices moving forward.

          • whatup12

            agree, it was too expensive when they launched. they needed to hit the 299-350 price point and then with keyboard have it cost less than an ipad. ie, you cannot compete with established market leader when entering at the same cost with a completely new product. and this is coming from someone who really gets the utility of a Surface. If they had gone 350 and then had a bundle with keyboard at 450 or 425 or even at 399 with keyboard, it would have done better (or so i guess). We bought one for my mom on day 1 of RT for basically 700 with the MSFT care warranty, keyboard, and 32 gb. And that is just way too much for average consumer. my wife bought one when they were giving away type cover. i bought one for myself when it was 199. :) …ie, even someone who loves MSFT products like me was unwilling to buy the surface at that price. luckily, i traded in my surface for 199 and then got surface 2 :)

          • NGM123

            Totally agree, see my earlier comment below, peace fellow Surface brother

          • SategB

            But the only way for the product to be successful is for “average consumer” to be willing pay non-discounted prices other wise the product is not sustainable and a failure.

          • whatup12

            And that is why the Surface 2 has been out of stock at MSRP prices. are you still talking?

          • Sategb

            A by product of limiting production rather then demand out pacing production ability. The company got massively burnt with over production of first generation product and committed to make sure it would not be embarrassed again even if it meant a couple of buyers would not have product available. A prudent decision from a long term business point of view.

          • whatup12

            the difference between me and you right now is that you “know” and I am guessing based on all available evidence. We all get that they didn’t want to be left with a huge amount of stock necessitating another write down. that is clear. What we don’t know is how many Surface 2 were produced and whether that production was at capacity or not. Right now, they have been out of stock for the last 3-4 weeks at the busiest shopping season of the year. That is a great shame for Microsoft–and would imply limited capacity to produce. Even if it took them a week or two to ramp up supply when they noticed that they were selling more than they thought, the thing has been out of stock for too long. I don’t know what the long term consequences have been in that I don’t know whether people are waiting for the surface 2 to come back in stock or just went with a different tablet instead.
            so yes, the thing sold more than they expected. It appears that these sales have been sustained in that it remains out of stock. It appears that their broader distribution choices this time around may have worked for them since it is out of stock at best buy, Walmart, etc. And indeed, only selling the Surface RT in Microsoft stores and online was a grave mistake the first time around. So only time will tell when an announcement is made about how well or how poorly this thing sold. I don’t know. How do you?

          • SategB

            Wrong, no that writedown was for excess product sitting in warehouses that would not sell at a price that covered direct cost, it has no affect on the on going concern of future production of any additional unit.

          • NGM123

            Link?
            Besides, I would call BS on the original Surface 1 not being marketable at $299.If the current stream of Intel 8 inch tablets can all sell at times well below $299, so can Surface 1

          • SategB

            See image

            Remember this does not include retail profit margin.

          • NGM123

            I can’t see any image? From everything I’ve ever read, the specifics of the write down are vague to say the least.

          • SategB

            No information has revealed roughly 6 million Surfaces being unsold inventory forcing write down

          • whatup12

            “no information” — you mean about the same amount of useful information included in your posts?

          • SategB

            I apologize for a omitted comma after No and information. Though it allow you to vent a bit more of this curious internalize distemper so all is not lost.

          • whatup12

            You mean new information and not no information, right? The joke was about the fact that you said no information… :)

          • NGM123

            Lol, how true, truck loads of opinion being masqueraded as facts.

          • whatup12

            By the way–i am in Canada for the weekend (normally am in the US). and the Microsoft store in the eaton center in Toronto is also out of surface 2 (though they had some surface 2 pro) and also out of type covers (except for pink). They indicated that best buy and future shop are also out. And they also indicated that they have turned people away who were interested. This is painful to hear…and embarrassing for msft. They said it has been about a month. ouch.

          • Guest

            Ouch is right and it even worse then you know.
            Talking to some of my internal friends who work at MSFT, they tell me everyone is avoiding having any connection to the product. After a billion dollars spent on Advertising and another near billion spent writing down excess inventory people at the company think any responsibility for the product will be career kiss of death specially when the new CEO takes over.

            As they told me if you can find one but it, there is serious doubt any more will be made.

          • whatup12

            Why would you bother coming in a website and posting a lie? Do you really know people that work at MSFT? And they have options in what division they work in allowing them to stay away from the surface. I think that this is just a flat out lie.
            The reality is that Microsoft has just started entering the tablet industry–and if you followed the above discussion at all you would know that many of us feel that they appreciate they lost money the first time around and the question now is how many Surface 2s have been sold. However, you win the prize for the most ludicrous statement of the night. and maybe so far in 2014. ie, that Microsoft is not trying to make surfaces to cover existing demand when the money invested in designing and building production facilities for Surface 2 has been established and when there are outstanding orders everywhere. You should phone your parents and tell them you won a prize! :)

          • LexicoRed

            It makes sense to what she/he says. No one wants to be associated with a failure product and if we are honest with ourselves Surface has been a repetition of failure; a $1 billion ad campaign that sells close to zero product, a $900 million write down on unsold inventory, not producing product for the business selling season of the year, and a update that bricked the device.

            Any one with a brain would want to be associated with it. While I like mine very much I wouldn’t want to be involve with the product if I worked at MSFT.

          • whatup12

            If one works at Ford designing and manufacturing a car that does not sell well, do they start designing another car? Realistically, there is some flexibility in organizational design but not to the point where people (at anything but the highest levels) can decide what products they do and don’t want to work on.
            Again, the OS and tablet wars are in their infancy and will be decided in the order of decades and not single years. We don’t know how even the Surface 2 has done yet…ie people need to stop thinking in the short term and have more of a vision. For some reason, nobody gets mad at google when they try and develop new products some of which succeed and some of which fail. but MSFT has version 1 of a product fail, and it is doomed as a company? We will see whether or not Surface as a concept and a product for MSFT in the long term will be successful or even viable. and then they will decide what to do next accordingly.

          • NGM123

            Ouch again ! Hope your wrong as the product finally seems to be getting some traction in the market place.
            It’s one thing to throw a few billion down the gurgler while attempting to gain a foothold in a critical marketplace, but all together a different thing to now walk away and abandon it just as it’s starting to move, that then would be a total waste of time and money and an even worse decision to make.

          • SategB

            Regulated by GAAP only direct cost of an asset can be a part of a write down. R&D is an indirect cost so it could NOT be part of the Surface write down.

          • whatup12

            that is just not true. in pharma, if a drug never goes to market, the r&D costs including phase 1-3 trials are included in the write down. do you check any of these facts before posting?

          • SategB

            R&D is not capitalized.

          • whatup12

            It’s common for a business to spend money on research and experimentation, or research and development (R&D), for creating new products or improving existing ones. Not only can these costs be high, but you may not net any real benefit until years later when the research is complete.

            As an incentive to keep you investing in your business, putting new products in the market, and creating jobs, the federal tax code helps you recover some of your research and experimental costs. In most cases, you can deduct, amortize or write off these
            costs.
            again, check your facts please.

          • SategB

            Yes but they are not part of a GAAP “write down” as perform by MSFT with the Surface line.

            You are unfortunately getting your terms and principles mix up in regard to Accounting and GAAP standards.

          • NGM123

            Your comments are opinion only and have no facts to back up your negative slant. Why not take your anti MS opinions back over to android central, troll.

          • whatup12

            You are right in that i am not an accountant by training, but my guess was that GAAP standards are far more complex than your posts would imply. Please bing an article called :US GAAP Pharmaceuticals and Life Sciences: Issues and Solutions for the Pharmaceuticals ad Life Sciences Industries. This was prepared by PWC and is a 90 page document explaining the nuances of GAAP. And there also appears to be IFRS which has different standards–each of them seems to allow certain write down for parts of R&D. Maybe you can also provide a source that this is not the case.

          • SategB

            This is why deeper insight into the topic can be a benefit to going factual understanding of the topic. This R&D tax credit is a special life science and pharmaceutical companies signed into law in 2012.

            This tax credit has no bearing on the Microsoft inventory write down. The write was to depreciate assets of excess Surface stock. Sadly, this near billion dollar write of assets has no impact on future price of product.

            The tax code of the United States and GAAP is very complicated, your mistake is amateurish but completely understandable with your admission it is an area where you lack knowledge.

          • whatup12

            please–enough opinion and text. some citations…fact. fact. facts. i am happy to be proven wrong, but your words alone cannot accomplish this. you need some proof. without it, your insight is simply not that convincing.

          • whatup12

            for example, this citation appears to disagree with you: nysscpa dot org cpajournal/2003/0703/dept/d074603 dot htm.

          • SategB

            My friend it appears your disagreeing just to be disagreeable. There is tax credit implementation that can be applied towards revenue that offsets income tax obligations through the vehicle SFAS86 if done in context of IAS Standard 38 but within the exclusion as defined within SFA2. Though these are not applicable nor even relevant to the inventory write down MSFT did on unsold Surfaces.

            Microsoft took the near billion dollar write down because of near 6 million unsold Surface that was in excess to demand that would not sell unless discounted below the amount that it cost the company in material and manufacturing.

            I enjoy discussing and educating you on Corp. tax code and policy but I don’t think this is the forum to do so. Maybe we should share emails so we can directly address your weakness in understanding on this quite headed issues. It would be my pleasure to help you my friend. I compliment your desire to want to learn more.

          • whatup12

            Why is it me that is
            being disagreeable to be disagreeable when we disagree? Look in the
            mirror much?

            If one digs down one
            layer deep, you realize that the “6 million number” comes from a
            series of technology writers pretending to be economists. The amazingly
            complex algorithm they used was to look at the 499 to 349 price change and
            scale up to 900 million to get 6 million.

            Whether or not we can
            agree on anything (and it is likely that we cannot), we can likely agree as you have implied throughout your posts that the tax code is complex. If it is so complex, do you really think that this is how Microsoft calculated their write down from the surface? In document that I just sent, there are
            indeed a series of standards that could have been applied. And in each of
            these scenarios, the estimated numbers of unsold surfaces would have greatly
            shifted from 1.5-6 million. So people
            quoted the number that would generate my hype and more clicks and more comments…that
            is the core of their business model and is not surprising.

            But none of that speaks
            to the success or failure of the Surface 2 other than the most simple of adages
            in that the past predicts the future.
            However, even that adage doesn’t apply when someone has the opportunity
            to shift their strategy. The marketing
            approach for the Surface 2 was radically different and it appears that the type
            covers are far more population that the touch covers. Ie, the productivity tool is more popular than
            the “cool cover”. So in that, time will
            tell about whether this worked.

            But you still have not
            provided a single fact…and thus remain unconvincing. I work in a field where facts rule the day…one
            has to be prepared to be proven wrong.and not bear ill will. But you have not met that standard—and not
            just because “I want to be disagreeable”

          • whatup12

            ps–wrote in outlook and copied and pasted in as it is too slow to write in these comment fields.

          • SategB

            Sorry, only old inventory is part of the write off. Planning and production would not be. The write down will have no affect on current or future generations retail prices, sadly.

          • whatup12

            In all seriousness, your understanding of the rules of the SEC are about as accurate as your command of the English Language. By the way, I hope that this comment does not generate any adverse affect… all kidding aside, affect and effect are two very different things.

          • SategB

            I am confident you mean no ill will but it would be good to remember that many post here who English is not their native language.

          • whatup12

            Indeed, English is not my first language either. and one has to be able to take a joke–not like i made fun of your mother or anything :) but I think the issue here is that you post a lot of comments that would seem like it is fact, when searches of the literature show that it is just not true. ie, GAAP, Microsoft revenue streams, inventory, performance, etc.

          • SategB

            I suspect that it is not the facts you object to but that the facts does not fit a narrative that wish to believe.

            To clarify it is my opinion Surface is a failure based on the fact it sold poorly, by the fact that a billion dollar ad campaign did stimulate demand, by the fact company had to take a near billion dollars write to expense excess inventory and by the fact MSFT knew demand is limited so they were unwilling to commit to producing any significant quantity during the busiest shopping season,

            I wish this was not the case but I refuse to ignore the facts just because I find them to be unpleasant.

            I hope my English was good enough if not feel free to make a mother joke if it makes you feel better my friend.

          • whatup12

            This discussion was not about whether Surface RT was a failure–it was about whether the concept of the Surface is a failure. Even Forrest Gump would comprehend the former, whereas it takes a psychic to decide the latter. So that makes you either Forrest Gump or a psychic.
            All kidding aside, MSFT is entering a new market and there has to be some expected bumps in the road. You used your fancy jargon earlier to say that MSFT taking some risks is not a bad thing. On that, we agree. Whether it was a wise decision will get worked out in the order of decades–not quarters. If one had judged the xbox a year in, all would have run for the hills. But give the product some time to mature and it has earning potential. Why do you refuse to think in the long term?

          • whatup12

            Also, every one of the points that you have made about how GAAP works, IFRS, etc–demonstrate that you try and disguise opinion as fact. A quick check has shown each of these to be at best you being bad at what you do, and at worst, lies.

          • whatup12

            Check out my post about GAAP and IFRS below…Price Waterhouse cooper appears to disagree with you.

    • SategB

      So what you saying Surface is a great product at half the price MSFT wants to sell it for…not so sure that equates to being successful product. :(

      • NGM123

        I didn’t mention if it was a success in their eyes or not, just that the price point is generating lots of interest. IMO it is now becoming a success from a sales perspective because of it’s price, gaining much needed acceptance and traction in the marketplace.Having written off the original costs my point was perhaps the original Surface could remain in production at a price point competitive to Nexus as an example, running alongside the more expensive Surface 2