Recent SEC Filing Reveals That Microsoft Is Still Losing Money On Every Surface Device Sold

Microsoft reported its latest financial quarter results last week and it was better than what many analysts expected. As Microsoft is transforming into a Devices and Services unit, the results of the newly formed Devices unit is an important one. As per the recent SEC filing by Microsoft, Microsoft is still losing money on every Surface device sold. The sales of the tablet has not hit the volume to make it profitable. For the quarter ended on March 31st, Microsoft lost about $45 million in Surface sales and about $300 million for the nine months ended March 31, 2014.

Three months ended March 31, 2014 compared with three months ended March 31, 2013:

Surface revenue was $494 million for the three months ended March 31, 2014. Surface revenue increased due to a higher number of units sold. Surface cost of revenue was $539 million for the three months ended March 31, 2014, which increased due mainly to a higher number of units sold.

Nine months ended March 31, 2014 compared with nine months ended March 31, 2013:

Surface revenue was $1.8 billion for the nine months ended March 31, 2014. Surface revenue increased due to a higher number of units sold. Surface cost of revenue was $2.1 billion for the nine months ended March 31, 2014, which increased due mainly to a higher number of units sold.

Even though Microsoft has not shared any numbers related to the no.of Surface units sold, we can come up with an approximate number by using the revenue posted by Microsoft. If you consider each Surface unit to bring in $350 of revenue, Microsoft should have sold about 1.4 million units(even less if more Surface Pro units were sold) of Surface devices in the last quarter. With the upcoming release of Surface Mini, I guess Microsoft Surface unit can turn profitable within next 18 months. What do you think?

Source: SEC

About the author  ⁄ pradeep

Pradeep, a Computer Science & Engineering graduate.

  • ekral

    Microsoft officially do not sell any Surfaces in the Czech Republic and many other countries. Microsoft is worst devices seller ever !!

    • http://yourig.livejournal.com/ ZloiYuri

      No. MS owners living in illusion that there is no civilization abroad US.

      • Frederick Edwards

        Luckily for me, they have acknowledged the existence of Canada. This will be my next PC.

        • http://yourig.livejournal.com/ ZloiYuri

          Hehe. But they see Canadians exactly as in South Park)

          • Frederick Edwards

            I’m not your buddy guy… watch it.. :]

      • Alan

        Right, so even though I was born and live in the UK I’m an American because I use MS products?

    • tofferne

      I agree with you, Microsoft’s sale is so poor, only because of themselves. I´m traveling a lot in Europe, and living in Czech Republic. Around in many countries it’s impossible to find a Nokia Phone and Surface 2 products.
      Microsoft are loosing 50 % of sale or maybe more, they let Samsung and other devices run with the market.
      In every little corner you can find all kind of Android, Samsung and Appel devices, It’s like MS don’t take it serious. They need to change the sales – Machine totally and 100 %, if not they will loose more and more.

  • manish

    Microsoft should focus on look beyond US policy rather than only US policy .

    • Rishicash

      A very common refrain and one that MS would do well not only to listen to but to act upon.

    • PoohGQ

      May be now you understand why they had to acquire Nokia handset division. While Microsoft lacks the knowhow in supply chain management for a diverse product range on a global scale, Nokia will provide that Knowhow. This in turn will not only help Lumia brand (with an unlimited ad budget) but also help the Surface brand and Xbox brand. This in turn will trickle down to the services, which have also been losing out to Google’s crapware.

  • NGM123

    What a tragedy, it’s such a great product but the world knows zip about it.

  • ComputerWorld

    cool story bro, where did you see it from?

  • SategB

    As I been stating for months now, this product add no color to the company’s bottom line. Moreover it reinforces the accurate position hardware is a distraction for operations who’s core compentcies are withing the Software and Services arena.

    Politically it may be difficult but sooner they spin out hardware the better. Nedella has communicated he understands this, so it is simply a question of when not if.

  • Rikkirirk

    Everything will fall into place in due time. This is a new investment for Microsoft. In the initial investment years companies mostly take losses on their new investments. But it seems to me that Microsoft is already near breakeven point. Microsoft wil break even in the first or second year of their investment in Surface and that is quite remarkable. Surface is already it seems a multibillion dollar revenue business and profits will be flowing in soon. This is unlike a lot of investments (or projects for those who Google want to keep in the dark) made by Google of which most are still not marketed and or are not even profitable, like Google Docs, Chromebook, Google car, Google fiber, Google Glass etc. Microsoft is going to try to take a piece of the 120 billion dollar worldwide PC market, while still partnering with PC vendors. If they succeed, which seems very likely, it would be great. And do not forget the 300 million investement in Dell. Question is what are they going to get for that??? But Microsoft may succeed in being the first succesfull devices and services company in the world. They did this with the Xbox, so there is no reason that they cannot repeat this with other devices.

  • Willem Evenhuis

    Interestin. This article is giving me the impression that somehow great devices go hand in hand with company losses, whilst the most profitable products seem to be soso devices (well maybe with the exception of the iPhone perhaps?). I love my surface pro. Back camera, battery and some stylus support wishes aside, I actually use my surface pro. I’ve even started to slowly use it for both work and private use. I see potential in the surface line, and would certainly consider a surface upgrade in time, if my feature improvements will be met.