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Microsoft loses $45m on Surface tablet sales

02 May 2014
Microsoft Surface 2 with 4G

Microsoft is losing money on its Surface tablets, with increased sales actually leading to further losses due to increased production costs.

Microsoft revealed that it shed $45m on Surface devices in its last financial quarter, in a recent filing with the Securities and Exchange Commission (SEC).

The document shows that in the three months ending 31 March 2014, revenues for Surface units hit $494m. However, the cost to produce these devices was $539m. Microsoft said this “increased due mainly to a higher number of units sold”.

The figures are underline how difficult Microsoft has found it to make any headway in the tablet market, with Apple’s iPad still the leading device in the category. Although even Apple has seen sales of the device fall in line with industry trends recently.

The losses on the Surface range of devices could cause new CEO Satya Nadella to ditch the device, although with Microsoft completing its acquisition of Nokia, bringing phone and tablet hardware-manufacturing capabilities in-house, the firm may merge the Lumia range of devices into the Surface portfolio.

Elsewhere in the filing with the SEC, Microsoft noted that the end of Windows XP had helped boost licensing revenues for the first three months of 2014, although profits were down due to the production costs, Microsoft said.

One area of good news for the firm was its Windows Phone income, with revenue for the last nine months of its financial year increasing 33 percent, although this still only represents an overall revenue increase of $429m. 

Despite the disappointing numbers for Surface and Windows revenues, Microsoft recently posted profits of more than $5bn, driven by a huge uptake of its Azure cloud platform.

A video of the Surface Pro 2 is embedded below.

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Dan Worth

Dan Worth is the news editor for V3 having first joined the site as a reporter in November 2009. He specialises in a raft of areas including fixed and mobile telecoms, data protection, social media and government IT. Before joining V3 Dan covered communications technology, data handling and resilience in the emergency services sector on the BAPCO Journal

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