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Microsoft Continues To Lose Money With Each Surface Tablet It Sells
DroidJason1 writes: "Revealed from a 10-Q filed by Microsoft with the U.S. Securities and Exchange Commission, Microsoft has been losing $300 million and counting for the Surface in the last nine months. Data from Strategy Analytics has also revealed that Microsoft's Windows-powered tablets now own a 6% global tablet share, in Q1 of 2014. Android, on the other hand, remains at the top with a 66% global share. Apple's iOS fell to 28%."
Just kidding, they can have their S back. For now.
Don't waste your vote! Vote for whoever you want, unless you live in a swing state it won't matter anyways
Microsoft is a slow follower. Just can't keep up with Linux or even FreeBSD.
When all you have is a hammer, every problem starts to look like a thumb.
Introduce a product near the top of what people pay for tablets, have some imperfections, incompatible with other market leaders, and plan to improve it over time.
You've got nowhere to go but up.
Then again, 6% market share is pretty good considering the above. MSFT's policy is to get an entry in the market and slowly improve it until it has everything the competitors do and innovations of their own. v1.0 is always bad, v2.0 chaotic, and v3.0 starts the war machine on its path to dominance.
Futurist Traditionalism
We already know the Androd tablet "market share" is a fantasy since companies like Samsung provided fake sales info, and there's no reason to think they are not still doing so.
If Android tablet sales are so far ahead, why are Android tablet use figures so far behind?
"There is more worth loving than we have strength to love." - Brian Jay Stanley
They don't sell very many.
They've got a new boss though, I wonder if he wants to keep this up?
"In the last nine months, Microsoft spent $2.1 billion on the Surface, and gained $1.8 billion in revenue"
That gap really isn't too bad, certainly better than the Xbox/360/XB1 numbers which follows the same strategy of selling at a loss (after marketing) and making it up later with services. The mere fact that Microsoft is actually doing 500 million dollars a quarter in Surface is actually quite impressive.
Right now Microsoft needs market share, so I'd say the strategy isn't altogether a bad one. Especially considering that 2 Billion USD in hardware sales is definitely going to result in at least a couple hundred million in service revenue from Office and such.
They were all bought as gifts for baby boomers.
My guess is that many people who bought those are Android phone owners, and ended up using those instead.
Futurist Traditionalism
"Good..."
If builders built buildings the way programmers wrote programs, then the first woodpecker would destroy civilization.
Microsoft lost a few hundred million on the Surface tablet. Twitter has never made money lost $500 Million in the most recent quarter.
So what?
...and desperately attempting to avoid irrelevance.
That being said, there's some sense to the strategy. If it's true that they lost money on the original Xbox, then it's worked for them in the past. Selling products below cost is a good way to get customers, provided your product is good enough that they'll buy your next one at a price where you'll actually profit.
I don't personally see Microsoft tablets being taken seriously (the number of people I see on the internet who apparently like Windows 8 doesn't fit with the number of people I've met who like it in real life, which leads me to believe that they learned a lesson from Vista -- albeit not the right one -- and have seen the value in paying astroturfers to pad their failures a bit). But then again, I didn't expect the XBox to be a runaway success either, and it did just fine, so time will tell.
Fortunately there's enough competition in the tablet market among Apple and all the different Android manufacturers that Microsoft isn't likely to be able to achieve the level of lock-in that they have on the desktop market, which means that another viable tablet maker could actually be a good thing. So even though it's Microsoft, I don't wish them ill here.
in volume!
Breaks my heart! ;^D
Double production and halve the price!
Microsot can skew the market with billions of dollars and attack any market segment it wants, losing billions on the way. It can't compete directly against competitors initially, but can market the hell out of any product and leverage its monopoly in one area to destroy markets, competitors and fair competition in other areas. The US government Sherman Act is a joke. Microsot gained a predatory monopoly on desktop PC's, laptops, notebooks, and has tried to destroy consoles, the internet, online search, cell phones and tablets. The further it goes from its base, the riskier its proposition. It has destroyed the technology market in the US, and has damaged competition in that area for at least a generation.
Now that's what I call putting the customer first.
That's what they spent in nine months and what they got back out of it. They may get more money back on apps later on, but they have to spend money on those as well. For all we know their app market and own development may not be efficient enough to turn a profit but mostly, all the money they spent manufacturing and stocking up warehouses full of tablets and developing is suddenly not important any more? They have already written that off 100%? I'm betting they are in the red a lot more than this calculation suggests.
I was promised a flying car. Where is my flying car?
They sell at a loss but make it up on volume. Oh, no, they don't.
I notice you ignored North America, where the trend line is that Android is flat and Apple is increasing...
Also my main point was how bogus the Android numbers from the main summary are. You may not have noticed, but your global numbers say EXACTLY what I was saying, that "66% marketshare" is a bald-faced lie given the actual usage we are seeing. Apple is still vastly far ahead in tablet usage, and even globally the Android increase year on year is incredibly slight.
"There is more worth loving than we have strength to love." - Brian Jay Stanley
Did you realize StatCounter is reporting figures for ALL iOS and Android devices?
Do you not think that might be just a LITTLE misleading as to what is going on with tablets???
I totally agree there is a huge wave of Android phones. I even have one. But the percentage of Android tablets compared to phones is incredibly small.
"There is more worth loving than we have strength to love." - Brian Jay Stanley
"Excellent..."
Tieing desktop / sever OS to be the same as tablet is bad as well.
Also Surface RT should not be there as it can't run X86 apps if you want to have the same OS for all at least make them so they can run other win32 X86 / X86-64 apps
Change your name to Microcosm. That's for coercing half the world into moving away from XP, and suspiciously reporting IE bug at just the most opportune moment. Then we get to watch mozilla move in at just the nick of time with Firefox 29? Tell me there isn't sum10wong here.
Where does it say that, all I see in the FAQ is the numbers are for OS's. That means the iPhone/iPad numbers are muddled too, all bunched into iOS.
"There is more worth loving than we have strength to love." - Brian Jay Stanley
I couldn't figure out why anyone would bother digging up all those old ET carts. But now it makes sense. They need the room to dump all these tablets. Especially then RT tablets. Especially.
Too bad because the Pro models are nice. I just don't need one. I've been on Android for a couple years and I've got no reason to change.
to destroy the evil empire! If we buy enough surface tablets, Microsoft will lose all of its money and go bankrupt!
If Android tablet sales are so far ahead, why are Android tablet use figures so far behind?
Because those are not tablet use figures no matter how much you misrepresent facts to say what you need them to say to satisfy your agenda. They are web browsing statistics from chikitas web ad network in the US & Canada over a 6 day period and even if their ad network in that scope over that short time were to be representative of browsing habits as a whole that is *still* just web browsing usage and not tablet usage.
I'd certainly agree that Android feels sluggish compared to lower-specced iPad hardware-yay, Java!-but calling it 'barely functional' on any half-decent tablet (not some $50 low-spec Chinese POS) is simply ridiculous.
I imagine they are counting the cost of the windows 8 licence in the loss. It would give them tax relief to do so. That said, I'm writing this on an Acer Iconia tablet with windows 8, and I actually like it now that it is patched with the latest windows 8 updates. I'm looking forward to the start menu being returned though.
Ok, thanks for that - I didn't see that you could sub-select the platform options independent of the OS.
So I retract what I said about the figures being mixed.
"There is more worth loving than we have strength to love." - Brian Jay Stanley
You can't keep burning capital to weaken and thwart potential upstarts and competitors. I did some reading into the whole Windows 8 API fiasco and it looks like they've royally F'd up again. How can they expect developers to commit to their smaller market share when they keep jerking around their preferred APIs?
They're never going to me able to make it up on the volume.
Got one from China for $300, including the touch cover. And it probably costs less to manufacture, not more.
Try a 2013 Nexus 7? WRT software, I find it very odd that even today iOS doesn't support multiple/restricted profiles. They're not that useful in a phone but make perfect sense on a tablet - I can "sandbox" the tablet for my daughter to be kid-friendly (and deny access to a browser, for now).
no doubt this must be the pro, I haven't seen any RT stuff mentioned in ages... and I've yet to see a surface anything in the wild.
Isn't the lack of multiple profiles because of a patent for this kind of thing on mobile phones held by Nokia?
Try a 2013 Nexus 7? WRT software, I find it very odd that even today iOS doesn't support multiple/restricted profiles. They're not that useful in a phone but make perfect sense on a tablet - I can "sandbox" the tablet for my daughter to be kid-friendly (and deny access to a browser, for now).
No point in trying to talk sense to him. He's a died in the wool fanboy (you see SuperKendall on all of these threads trying to find any reason, no matter how vauge or far reaching to try and disprove anything slightly critical of Apple).
I highly doubt he's used an Android tablet in his life. Basically he has to recycle any old myth no matter how many times it's been disproved.
But that aside most Ipad users who've tried my Nexus 7 (2013) have commented that it's faster than an Ipad, even those who are fanboys have been begrudgingly forced to admit it's a great tablet. Software, well seeing as you use your browser for everything these days it doesn't matter but the quality of software on Android these days matches or superceeds that of Apple.
People will choose what they like, but some people like our friend Mr SuperKendall cant accept that.
Me, I like my Nexus 7 but I'd rather sell it to others on the good points of having one, rather than the bad points of the competition.
Calling someone a "hater" only means you can not rationally rebut their argument.
When will Dr. Evil be told to clean out his desk? You might not have figured out who the company's main liability is, yet; but the rest of us have known for years, now.
By the way, Windows 8 sucks; and although I intended XP to be my last Microshaft operating system, (after which I would have migrated to FreeBSD) thanks to the UEFI standard that you and the rest of the consortium of corporate supervillains implemented, that is no longer possible for me. If I want to use FreeBSD at all on new hardware these days, and I want full hardware support, I'm stuck doing so in vmWare under Windows.
Insincerely yours,
Petrus
Considering they lost about four billion on the original Xbox to force themselves into the games industry, this seems like pocket change.
No, Android has been doing this for years. Apple just want their users to buy another device, which pretty much works for them.
People still put any trust in what Strategy Analytics has to say? Seriously?
Their numbers are routinely discredited, in the extreme. They aren't making slight errors - they are overtly fabricating numbers seemingly out of thin air all with an eye on, as they say on their own website, "improving competitive positioning" for their clients. They aren't a market analyst firm. They have clients and they serve the interest of those clients, up to and including creating the impression that their clients are performing in the market better than they actually are.
Even when confronted with hard numbers that show their figures are off by several million, they stand firm and do not correct their data. We're not talking about being off by slight degrees - we're talking about figures large enough to engulf the entire reported sales figures of major manufacturers. We're talking about things like figures including phantom product categories that nobody - nobody - can verify.
They are making shit up.
Come on - they aren't reliable even as one set of data points to be viewed alongside other analysts firms' data. I could make up numbers and be as reliable as they are. If we want to be taken seriously as knowledgable nerds, we have to stop putting any stock into anything that comes out of companies like Strategy Analytics.
I've been using WinTabs for many years. I've found my Surface Pro 2 to be very useful to me for the past few weeks I've owned it. As for the RT models, no way would I own one. I still love my iPad, but Apple really needs to make an iPad Pro with OS X available to the market.
I've actually found that Windows 8.1 makes way more sense from a tablet interface too. I remember reading that somewhere along the line. My Surface Pro 2 is beginning to replace my laptop except for the times when I need Win 7, a real keyboard, or an Ethernet port.
Like it or not, I believe Microsoft has created a very decent piece of hardware in the Surface Pro 2. It even makes me like Windows 8 a good bit more too as it makes sense in that context. I'm sure the same thing applies to other makers WinTabs too. I like my iPad and even appreciate the jail aspect of it which I believe benefits the average non-technical user. However, I need a full featured OS on any tablet I use, and the Surface Pro 2 delivers for me.
MS has never had a significant victory in hardware and they never will. No one takes them seriously and MSnokia will be no different.
The question is, are they *actually* losing money (price vs. unit cost of goods) on each Surface sold, the way Sony actually spent more to produce each PS3 (originally) than it sold for, or is the Surface business losing money because their volume is too low to cover the cost of running the line of business? The former would be terrible for Microsoft because it means that the Surface has negative value - the product is less than the cost of the parts! The latter isn't quite as bad, in that if the sales increase, it can become a profitable business. And it'd be nearly impossible for the Surface not to increase sales volume. Heck, even if they shut the business down and dumped them, their sales would improve.
Personally, only the Surface Pro is interesting - the RT is just a complicated, expensive tablet, and iPad or Android tablet are dominant (and simpler and cheaper).
And the Surface Pro is too expensive to make sense - for the same money you can get an ultralight laptop, with a touchscreen, which is more generally useful.
Enable 3D printed prosthetics!
It sounds like Microsoft has already made the tablets, so they've already lost money. Selling them at a loss is just reducing the loss.
"Who controls the past controls the future. Who controls the present controls the past." -- George Orwell
I do not want iOS or Microsoft because I can't get the source code, and audit the software on my devices.
Malware is bad on all platforms, but Android gives me an edge so I stick with it, on my tablets and phones I buy.
(i.e. I use Cyanogenmod source code)
Microsoft is even worse though. I sort of have a bias here, because I was a Microsoft Admin in my younger years for about 10 years, and due to all of the lost sleep being on call fixing Microsoft crap at 3AM in the morning, I can't stand their products.
Last thing I want is something like that on my tablet or phone.
No thank you.
Got Geometrodynamics? Awe, too hard to figure out? Too bad.
It's a loss leader where you sell or give something away in the hopes of making the money back on some other product or server you hope the customer picks up on. In the case of google it's advertising and sales lists. Microsoft wants you in their app store and buying windows and MS office go with it.
What exactly is the main problem with it? That it is slow/laggy? I would agree with that, but it is still *quite* usable. This is a two year old device, that was sold for ~$230. It completely pushed the price/performance tablet boundaries, and the small tablet form factor. It literally started its market, Apple likely wouldn't have even released the iPad mini because of it. Most importantly it works bloody great for reading websites, articles, and books. I still use it daily for this purpose. It can also handle 720p video with ease, thanks to dedicated hardware, and I watch all sorts of tv shows on it a few days a week. To top it off, the batter lasts for days if used sparingly, and can handle a full 8 hour day of web browsing/video watching as well. It is a good tablet, and it was sold at an incredible price when introduced.
Microsoft doesn't care about making money from retail purchases of Surface or Windows Phone. These divisions are patent farms and make all their money by charging licensing fees.to other tablet & phone manufacturers.
Honestly, I know it's probably an unpopular opinion around here because it's fun to hate on Microsoft... but having now owned a first-gen Surface Pro for about 2 months I have to say that it's the best tablet I've ever owned. I picked it up on the clearance when the Gen 2 was released because despite some misgivings I really did appreciate the concept.
It's not a great laptop, and it's a rather bulky and heavy tablet but the ability to have a REAL computer that I can carry around easily is incredibly valuable to me. That and being able to use WiFi on planes any more means that I can be in touch and even work in a coach seat while flying across the country. Given I've just completed business trip #4 for the year so far this has become very useful to me.
Despite its limitations, it has surprisingly managed to supplant any number of laptops or tablets I have had at home for just about everything except for very niche uses. It's really fast for just basic web surfing when kicked back on the couch, the stylus is awesome for writing a few hand-written notes in OneNote and having my Type keyboard close at hand means I can plop down on my dining room table and do everything from write a quick email to fire up MobaXterm and get some real work done on the Linux systems I have at home and at my virtual hosting service. As a general-purpose computer it has become a better form factor and a better system than anything else I have at home. My iPad is gathering dust in a drawer due to lack of really good productivity apps or SSH apps, my Macbook Pro sits around mostly waiting for me to feel like firing up a game on Steam or to work in my image library (the big hard drive helps, here!) and my Linux laptop is... well... mostly gathering dust next to the iPad. I have a smattering of Android tablets including a Nexus 7 that I haven't charged in months.
I know this is anecdotal and the Surface Pro isn't really for everyone. For my needs though it's absolutely perfect. Since I moved to a smaller home a year ago (by choice, a condo) I no longer have a study or even a desk so a desktop PC is out and a laptop has to be used on my dining room table or (uncomfortably) on the couch. My Surface Pro I can hold like a tablet if I see fit or plonk down on the table at a moment's notice. This works for me, and as well as the aforementioned coach seat it's also awesome when I travel so I can bring it to breakfast at hotels with me and check email/Slashdot/etc. while I eat and drink coffee.
And a quick snippet of advice for anyone with a 1G Surface Pro... if you want to significantly increase your battery life you can set the maximum CPU on battery to ~60% in the power management settings, then you get at least 30-40% more battery life with no noticeable decrease in performance unless you're doing something really heavy duty. Since I mostly just do web surfing and email on battery and more intensive stuff (like work) on the power adapter this works really well.
Oh and we have looked at other tablet/convertible type laptops at work recently and are probably going to standardize on the Lenovo Yoga as our corporate standard. However, in terms of sheer build quality I still feel my Surface Pro has the Yoga beat hands down.
I should try that tablet, as if anyone can make a tablet that works well it would be Google - I just can't believe the Samsung one is so bad.
I have to say I thought the Kindle Fire looked pretty appealing also, as you say a platform with multiple profile option is pretty useful and it has that too.
"There is more worth loving than we have strength to love." - Brian Jay Stanley
They are losing money, and the /still/ aren't including the required keyboard?
Meh.
[Late to the tablet game]...and desperately attempting to avoid irrelevance.
Sounds like Intel, except that they lost nearly $1B into the mobile market over last three months not a palty $300M in 9 months.
I bought one and returned it. The aspect ratio is terrible. Apple did get that right.
Are agnostics skeptical of unicorns too?