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.