Microsoft has revealed that it made heavy losses on its Surface tablets – its first foray into personal computing hardware – as sales reached just $853m, while its Windows division saw profits slide by $2bn. In its K-10 annual report, Microsoft also revealed the agreement under which former head of Windows Steven Sinofsky was let go last October.
After writing off $900m on Surface RT tablets alone and orchestrating a sizable marketing campaign, Microsoft has revealed that total sales for Surface tablets – RT and the more expensive Pro – only reached $853m. The figures were compiled before Microsoft slashed the price of the Surface RT tablet by 30 percent in July.
By contrast, Apple made over $1.4bn from iPad sales in the third quarter of 2013 alone.
The Surface RT went on sale with the launch of Windows 8 in October 2012, while the Surface Pro hit stores in February this year but failed to win over consumers with its high price and bulky design.
Microsoft also detailed the agreement Steven Sinofsky signed when he was ousted in 2012 following reported differences in opinion over the direction of Windows. The agreement states, in addition to the releasing of stock options, that Sinofsky is not allowed to work with companies including Amazon, Apple, EMC, Facebook, Google, Oracle and VMWare for a year after his departure. Sinofsky also signed a 'non disparagement' agreement, meaning he is not allowed to comment on Microsoft practices during his time with the company.
Elsewhere, the company saw profits on its Windows software decline by $2bn despite seeing an overall increase in revenue. The company blamed a declining PC market –which it says decreased by nine percent in 2012 – and a major marketing push for Windows 8 and Surface tablets.
Microsoft's marketing expenses increased by $1.4bn from the previous year, up 34 percent to $15bn, with most of the cost attributed to its new products.
Overall, Microsoft's annual profits increased by $5bn to $21bn, helped by its enterprise and entertainment divisions. Microsoft's online services division also saw significant gains, with its Bing and MSN products still haemorrhaging cash with $1bn losses, but significantly up from 2012 losses of $8bn.
Earlier in July, Microsoft CEO Steve Ballmer announced a major restructuring of the company's departments, creating four distinct departments based around operating systems, apps, cloud and devices.
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