Despite Sales Successes, Surface Still a Loser for Microsoft

By all accounts, the Surface Pro 2 is a major improvement on the first generation of Microsoft’s homegrown tablet. It’s fixed a lot of the first iteration’s problems, offers a longer battery life, has been selling at a brisk pace, and its widely regarded as an all-around better product this time out. But it doesn’t matter: Microsoft has reported to the Securities and Exchange Commision (SEC) that the Surface line of tablets is costing more money than it’s earning.

The news comes by way of Microsoft’s most recent filing to the SEC—helpfully parsed by Neowin—in which the company reports having earned $494 million in revenue from the Surface division from January through this past March. That’s an increase from the same time last year when the first line of Surface tablets were on the market, so that’s good, right?

Not quite. While the revenue for Surfaces had gone up, so too had expenses. Microsoft reports having spent $549 million on the production of its Surface tablets and accessories, meaning that the Surface line has generated a loss of $45 million. That’s less than ideal, especially considering how Microsoft keeps trying to position the Surface line as an iPad-killer.

All that aside, let’s also remember that Microsoft is pretty good at playing the long game. The Xbox division didn’t start earning money for its first few years—it was building a brand. The fact that the sales of Surface tablets has gone up from a year previous is a pretty great sign for the future of the device line, and Microsoft’s recent acquisition of Nokia’s devices division means that there will be even more hardware oriented people around to potentially make the Surface an unbeatable device.

The real question is how long Microsoft feels like losing money. Considering hoe gigantic the company is and how it generally earns more money than it spends overall, it probably isn’t smarting too much from losing a mere $45 million.

[Source: Neowin]