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Microsoft Businesses The Almighty Buck Windows

Microsoft Continues To Lose Money With Each Surface Tablet It Sells 179

Posted by Soulskill from the when-temporary-strategies-become-permanent dept.
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%."
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Microsoft Continues To Lose Money With Each Surface Tablet It Sells More

Microsoft Continues To Lose Money With Each Surface Tablet It Sells

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  • The Mircro$oft $urface (Score:5, Funny)

    by penguinoid ( 724646 ) on Tuesday April 29, 2014 @11:19PM (#46875323) Homepage Journal

    Just kidding, they can have their S back. For now.

  • Slow follower (Score:5, Funny)

    by Tough Love ( 215404 ) on Tuesday April 29, 2014 @11:19PM (#46875325)

    Microsoft is a slow follower. Just can't keep up with Linux or even FreeBSD.

    • That's a little off-topic, but at the same time, I think comparing a surface to a Linux tablet makes more sense than comparing a Surface to an iPad or an Android tablet: The Surface is a full-featured PC in a tablet form factor, but iPad and Android are basically spiffed-up cell phones in a tablet form factor.

      • Re: (Score:3)

        by gl4ss ( 559668 )

        you think they're talking about surface pro? that surface pro(2) has 6% ha ? because uh. android tablet is actually a linux computer capable of compiling on the device without too much of trickery while the surface rt is more limited than even an ipad in that regard.

        and they're already being creative to get the 6% figure, like dropping 100 bucks android tablets from being counted towards totals. (ok ok they're starting from 35-40 bucks for dualcore if you're asia now).

    • Just can't keep up with [snip] FreeBSD.

      Netcraft confirms they aren’t dying fast enough?

  • Typical MSFT mistake (Score:2, Interesting)

    by hessian ( 467078 )

    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.

    • Well as others have pointed out, the included stylus with the surface pro isn't bad value if that's your cup of tea.

      It's positioned for those who want a tablet AND a notebook computer but not BOTH.

      Has it the impetus to worry the market leader, Apple? Not so far, as no hybrid reintegrationalist device (combining iOS and OS X) has been launched.

      Would I consider buying one if I needed a portable computer? Well if it hurts MS financially and as long as the UEFI startup allows me to load my own bootloader, it's

      • which is why I have both. having one device while useful sucks. when that one device breaks you are stuck without and have a hard time getting support, as most of it is online and guess what your device doesn't work.

        I can have a laptop, a smart phone and a tablet. If something happens to one I can use one of the other ones to help fix the broken one or at least order a new one.

        I use my tablet for reading and online stuff. I use my laptop to load a dozen websites at the same time. play games and anything

  • We already know the Androd tablet "market share" is a fantasy since companies like Samsung provided fake sales info [tablet-news.com], 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 [chitika.com]?

    • If Android tablet sales are so far ahead, why are Android tablet use figures so far behind?

      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.

      • Re: (Score:1)

        by Anonymous Coward

        My guess is that 90% of the android tablets sold are crappy $100 ones, that people use for 5 minutes, then discover they're shit, and never use again.

        • My guess is that 90% of the android tablets sold are crappy $100 ones, that people use for 5 minutes, then discover they're shit, and never use again.

          I have a friend that's a Blackberry fanboy. He bought a cheap $100 tablet and complains about how shitty Android is, and how it always crashes (it's basically stuck in a reboot loop). I suggest it might be the hardware, but he keeps blaming the software. I've never had major reliability problems with my Nexus 4, or my Asus T700T tablet. But I didn't get the cheapest one I could find.

      • Re:People aren't using Androids (Score:4, Insightful)

        by MachineShedFred ( 621896 ) on Wednesday April 30, 2014 @07:27AM (#46877279) Journal

        I think I saw somewhere that the Android USB dongles also identify as tablets for these analytic purposes - I wonder how much those things skew the numbers.

        Plus, Strategy Analytics is a company that is paid to write these reports by vested interests. Often, their "data" doesn't stand the test of time.

    • Re:Share of warehouse inventory not good metric (Score:5, Informative)

      by afidel ( 530433 ) on Tuesday April 29, 2014 @11:48PM (#46875467)

      Old data is old, Android is up to 24% [statcounter.com] globally, and 35% [statcounter.com] in Asia and the trend lines are pretty obvious.

      • Obvious Trend (Score:3, Informative)

        by SuperKendall ( 25149 )

        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.

        • The data you provided was North American web usage. Drawing any conclusion from that is dumb when talking about global market share. You know there are other markets out there, those markets also are bigger than US markets in volume.

      • 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.

        • Re: (Score:3)

          by afidel ( 530433 )

          Nope, those are broken out for just Tablet, mobile is a separate category for phones.

        • Re:StatCounter number is ALL devices, not tablets (Score:5, Interesting)

          by Maxo-Texas ( 864189 ) on Wednesday April 30, 2014 @12:26AM (#46875629)

          Not sure. Good android tablets have gotten really cheap. Like $135 for more capability than a $300 android tablet only two years ago.

          Meanwhile apple and surface have remained expensive.

          I own two android tables and have given two as gifts. Because they are inexpensive.

          My daughter owns an apple-- because her company bought it for her.

          I do have a couple friends who own an apple they bought with their own money. It's cool. They have Apple TV too. But as a couple, they earn close to $250k per year and live in a $400k house and have new cars. They are not rich- but they are very far from the average americans standard of living.

          • Surface is not the only Windows tablet, though, and other Windows tablets are generally cheaper. Especially the recent slew of 8" devices, with prices in $200-300 range, directly competing against 7" Android tablets.

            • All of them have one flaw or another though. We've been looking at all the Windows tablets with an eye on Windows 8.1 for Industry to be used as retail handheld devices, and we have yet to come across a device that checks all the hardware boxes we're looking for. Perhaps in the next generation of hardware, at least one manufacturer will include all the stuff most people are looking for, without charging $800+ for it.

              • Out of curiosity, what hardware boxes were you missing?

                • Well, some don't allow for an external display. Some allow for an external display, but block the charging port when it's plugged in (WTF?!). Some have a crappy stylus that hangs on the side and have a crap digitizer. Some have a great digitizer (Wacom) but don't have something else.

                  We had Microsoft come in and show us a PowerPoint with about 10 of these things, and each one was missing something we needed / wanted for it to be a replacement device for our catalog.

                  • Ah, I see now. Yup, I ended up with VivoTab Note (I imagine that's the one that you covered under "have a great digitizer"), but the lack of any sort of video output on that thing is a major WTF.

                    • My favorite was the Dell Venue Pro 8 that doesn't come with Windows 8 Pro - we had to side load it, which took a bit of effort to figure out. If that one had the ability to dock, it would be a great device; but Dell wants you to pay $800+ for a 10-inch tablet in order to dock it, and we can get a laptop with twice the computing power for that.

                      That being said, Windows Industry and some of the rugged handheld designs coming out might be a pretty sweet solution for retail, finally replacing the ancient Motoro

                    • Doesn't Venue Pro 8 have a really shitty digitizer? I heard a lot of negative reviews stressing that point, and when I went to a local Microsoft Store to see for myself, they didn't have the stylus for the device on display (or for sale) - the only tablet for which it was the case - from which I can only surmise that the reviews were correct, and the store just didn't want to show something that embbarassing...

                    • We weren't as concerned with pen input for that - we were looking for an ultra-mobile companion device, or perhaps a replacement device for office users. Dell shipped us a Targus stylus that seemed to work fairly decently with it, but as I recall it used it's own batteries (WTF?). Our main mobility guy uses that as his tablet of choice that he walks around with, so it can't be THAT horrible - he's got a whole cabinet of iPads and android tablets from the usual suspects, and a few specialty devices (rugged

          • and live in a $400k house

            Greetings friend, I'm from Australia. Please, tell me more about this distant land where people can buy a house - an actual house, you say? - for just $400k, and where electronic devices, digital media and movie tickets are available at reasonable prices. :(

        • 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.

          Actually, what's interesting is that iOS, despite being under 20% of smartphones and tablets, still accounts for way more than 20% (closer to 50%) of traffic. Even worse in tech-oriented circles where iOS traffic can be easily be double that of Android.

          That's highly unusual - unless it means that a good chunk of Android phones and tablets are merely bought and junked, or bought and used as a featurephone.

          By all accounts and measures, OS X traffic is extremely minimal compared to say, Windows, certainly no more than its marketshare.

    • Re: (Score:3)

      by vux984 ( 928602 )

      "If Android tablet sales are so far ahead, why are Android tablet use figures so far behind?"

      Methodology? I mean, I read the article you linked to:

      "For the hourly usage figures, Chitika Insights sampled tens of millions of U.S. and Canadian tablet online ad impressions running through the Chitika Ad Network."

      My android is running firefox with adblock...and honestly even then i don't use it much for browsing the web. I spend most of my time in apps.

    • If Android tablet sales are so far ahead, why are Android tablet use figures so far behind [chitika.com]?

      You shouldn't blindly rely on statistics just because they are on the internet, these guys have a pretty spotty record [zdnet.com] and they provide no methodology nor do they seem to be very consistent or believable in terms of their statistics:

      For example, last May Chitika breathlessly reported that OS X usage was up 2.58% month over month (from 11.44% to 14.02%), while Windows usage was down 2.99%. There was no reason for the dramatic shift; it just happened. But one month later Windows usage increased dramatically

    • Use != web browsing. I love my android tablet, but I never use it for web browsing unless it's just for testing a design.

      • Re: (Score:2)

        by laird ( 2705 )

        By the numbers, lots of people buy Android tablets, but don't use them very much for either web browsing or applications.

        For example, if you look at http://gs.statcounter.com/#tab... [statcounter.com] Safari is 67.7% of mobile browsing activity, while Android is 15.4% and Chrome (runs on both iOS and Android) is 10.5%. Even though by sales reports Android devices are outselling iOS by wide margins.

        Similarly, http://www.forbes.com/sites/ew... [forbes.com] is just one example of numerous developers seeing iOS downloads and revenue vastly (

    • I'm surprised that no law firm nor the SEC has taken action against Samsung for lying to their investors. I don't know for certain but I would assume that lying to one's shareholders is both illegal and worthy of a class action lawsuit. When I first saw the news that they'd lied - let's call it "misreported" - to shareholders, I assumed that was going to quickly lead to very bad things for them. So far, nothing. I'm surprised about that.

  • The gap seems reasonable (Score:5, Interesting)

    by mechtech256 ( 2617089 ) on Tuesday April 29, 2014 @11:24PM (#46875355)

    "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.

    • Re: (Score:2)

      by Sir_Sri ( 199544 )

      Considering they're ~1000 bucks a pop that's not as great volume wise as it could be.

      But still, the only way you make a better product is make the best product you can, find out what works and what doesn't and make it better.

      (Full disclosure, Surface 2 owner, and while I'm reasonably happy with the hardware, Windows 8 is terrible, but at least I can do all of my computing on a single device on the road).

      • Re: (Score:2)

        by mellon ( 7048 )

        Hey, if Sherlock Holmes uses it, it can't be all bad, can it?

      • I am honestly stunned that they are selling these at a loss considering how expensive they are. Is Microsoft simply incurring high manufacturing costs because this is not their normal market? How is is possible that the production costs of these tablets is so high when equivalent android tablets are sold at a fraction of the price, presumably for a profit? Why else would third party companies even sell them, after all? They don't get app sale revenue from google... It just... boggles the mind.

    • $300M difference is not $300M loss (Score:4, Interesting)

      by dutchwhizzman ( 817898 ) on Tuesday April 29, 2014 @11:55PM (#46875509)
      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 think the majority of the problem is that Microsoft stock isn't seen as a risky growing company stock. The stockholders aren't expecting quarters with losses. Taking a loss on the tablets is hurting the shareholders profit margin and they aren't happy about it. I think the same concerns were raised with the initial performance of the Xbox so they will probably see it through and improve the tablet. The stockholders will just sit there grinding their teeth.

  • So What? (Score:5, Interesting)

    by rudy_wayne ( 414635 ) on Tuesday April 29, 2014 @11:27PM (#46875367)

    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?

  • Late to the tablet game... (Score:4, Interesting)

    by Lendrick ( 314723 ) on Tuesday April 29, 2014 @11:38PM (#46875417) Homepage Journal

    ...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.

  • Comment removed based on user account deletion

  • there is only one alternative (Score:3)

    by wardk ( 3037 ) on Tuesday April 29, 2014 @11:50PM (#46875483) Journal

    Double production and halve the price!

  • Gates said it (Score:5, Interesting)

    by Anonymous Coward on Tuesday April 29, 2014 @11:51PM (#46875487)

    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.

  • 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

  • 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.

  • This is our chance... (Score:3, Funny)

    by aurb ( 674003 ) on Wednesday April 30, 2014 @12:38AM (#46875693)
    to destroy the evil empire! If we buy enough surface tablets, Microsoft will lose all of its money and go bankrupt!

    • Re: (Score:3)

      by Kaenneth ( 82978 )

      ... which is why Sony disabled Linux on PS3s

      People were buying the money losing consoles, but not buying the money making games and accessories.

      • Are you kidding? People were buying PS3s and converting them over so they couldn't play the commercial games, but so that they could run Tux Racer on them?? A sizable percentage of the customer base was doing this? Well, it's a good thing Sony nipped that in the bud!

    • to destroy the evil empire! If we buy enough surface tablets, Microsoft will lose all of its money and go bankrupt!

      After the shenanigans of recent years, I don't even know which companies / governments comprise the evil empire any more.

      A small sample seems to include: Microsoft, Google, Apple, IBM, Facebook, Oracle, Verizon, Comcast, Russia's government, Bush/Obama, the NSA, the CIA, and Andy Dick.

  • 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

  • Strategy Analytics? (Score:4, Informative)

    by whisper_jeff ( 680366 ) on Wednesday April 30, 2014 @05:52AM (#46876781)

    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.

  • Surface 2 Pro Observations (Score:2, Insightful)

    by Anonymous Coward

    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 re

  • 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 incr

  • 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

  • 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.

  • Probably Unpopular Opinion (Score:5, Interesting)

    by Thumper_SVX ( 239525 ) on Wednesday April 30, 2014 @11:36AM (#46880551) Homepage

    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.

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