Microsoft: Surface Devices Sold More Than Double The Units Than Previous Quarter

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Microsoft Surface family

At its earnings reports released yesterday, Microsoft announced that the Surface devices sold more than double the units than previous quarter. Regarding Gross margin, the product costs grew with increased Surface sales and non-product expenses incurred to ready inventory lines for Surface 2 launchAlso they have experienced improved sales and marketing efforts around Surface devices. Earlier this week, Microsoft launched its next generation Surface devices Surface 2 and Surface Pro 2 in number of countries around the world.

D&C Hardware revenue increased $401 million or 37%, due primarily to Surface revenue of $400 million. The general availability of Surface RT and Surface Pro started October 26, 2012 and February 9, 2013, respectively.

D&C Hardware gross margin decreased $242 million or 54%, due to a $643 million or 101% increase in cost of revenue, offset in part by higher revenue. D&C Hardware cost of revenue increased, primarily due to $645 million higher Surface cost of revenue. Surface product costs increased with higher volumes sold, while other costs grew as we ready inventory lines for the Surface 2 launch and the holiday sales cycle.

Source: Microsoft

About Author

Pradeep, a Computer Science & Engineering graduate.

  • Bugbog

    It would seem that, as predicted, the Surface has caught on as a Brand name/utility product, selling old stock despite the imminent arrival of new stock, which indicates recognition of it’s inherent value.

    All that’s required is for the new Surface (2) to continue the sales momentum.

    • kid92x

      If what you state is correct, boy do I hope so. It seems like you are correct but we will surely tell if they give us some numbers of the second gen by CES. :)

    • Zdenko

      Poppycock, MSFT slashed the prices to below cost (remember the little $900 million write off ). As Croatian godfather would say “make the junk cheap enough eventually some idiot will pick up the garbage.”

      • nohone

        Clearly you haven’t a clue what a write down is. A write down (it was a write down and not a write off – two different things) is when something is priced more valuable than what it really is. Suppose I price my product for $10 and it costs me $5 to produce. It does not sell as well as I like, so I reduce the price to $8. $10 – $8 = $2. $2 x number of product unsold at the time I reduced the price is the amount written down. I am still making $8 – $5 = $3 profit / product, but it is not as much as I predicted and told my investors I would make.
        We don’t know how much profit/loss there was from Surface, but you cannot use the amount of a write down in any way to indicate if there was a loss. Just like when Apple did a write down on the original iPhone (there was a write down, they lowered the price by $100s, if there was not they would have SEC issues), Microsoft lowered the price of the first Surface to meet the market expectations. But it does not mean there was a $900m loss, and to think otherwise is ignorance of financial terms.

        • Zdenko

          Actually you are the mistaken one, what you explained is a discount.

          A Write of is a reduction in the book value of a asset. In mfg it would include all your associated cost of a item . So if your $10 item has $5 cost to produce, your selling price reduction to $8 doesn’t not effect your book value. Bui if you decide you have to sell to item below your cost, like $3, you will take a $2 write off. This is because your book value will never be achieved .

        • Guest

          @nonhone
          You got schooled! :)

          • nohone

            So he claims it was a loss (it wasn’t), he claims it is a write off (it wasn’t), and more or less wrote the same thing I wrote, then I got “schooled?”

            From Investopedia:
            Reducing the book value of an asset because it is overvalued compared to the market value. A write-down typically occurs on a company’s financial statement, when the carrying value of the asset can no longer be justified as fair value and the likelihood of receiving the cost (book value) is questionable at best.

          • Zdenko

            The the difference of a Write down and Write off is only in degree: write Down says there is some remaining book value while a write off says there is none.

            In a manufacture product book value is easily determined = associated cost of producing the product. A write down in Surface case is stating MSFT will not even get back % of the product cost. In other word every one they sale will be done so at less then what it cost to make.

            So again, you are confused and wrong. Other words your shoeing yourself as a baby moo cow trying to run with the bulls ;)

  • V.A.N.

    Wasn’t the Surface going thru a Fire Sale of some sorts? The Surface (and later Surface Pro) were in the market for some time now…and now they are starting to sell well?

    • rjmlive

      Correct

    • DKJr

      I think the problem was availability which has now been corrected. Jury is still out but I really think these gadgets have a market and consumers really wanted them but poor distribution and availability issues on MS’s part adversely affected sales. Now that this problem has been corrected, sales might actually greatly improve.

    • DKJr

      I think because availability was very poor and that now has really been corrected. Jury is still out but I think these gadgets really had a market and consumers wanted them but poor distribution on MS’s part adversely affected sales and adoption.

  • coip

    The Surface RT was great–way underappreciated. But the Surface 2 is the perfect upgrade. Microsoft addressed nearly all the minor flaws of the first Surface and made an even better product, and then, just because, they threw in 200GB of free SkyDrive storage, 1 year of free Skype, and finally got the marketing side right with great commercials. Surface 2 and Surface Pro 2 will be a hit.

  • Taha Veziroğlu

    They should have used Snapdragon

  • SategB

    Surface revenue of $400 million with say an average selling price of $600 = only 666,667 Sold

    666,667 sold = 2x last quarters sold or 333,333

    Total => one million in a half of year

    Not looking good :(

    • free

      Agreed, the availability thing is an excuse. Micorosft where effectively giving these things away at tech ed. Surface RT 64gb for £70 or 80 euro. £300 for the surface pro. Everyone who I know who went bought them both most of which where sold on ebay. Pricing for these things is just too high.

      • Zdenko

        Yes they are putting lipstick on a goat.

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