Surface Loses

The Register gleaned something I missed from M$’s 10-Q. M$ is actually losing money selling it’s shiny new Surface devices… How can that be?

I missed this gem because it was in the “9 months” period, not just the last quarter.
“Nine months ended March 31, 2014 compared with nine months ended March 31, 2013
D&C Hardware revenue increased $2.9 billion or 55%, due primarily to $1.5 billion or 38% higher Xbox Platform revenue as well as Surface revenue growth. Surface revenue was $1.8 billion for the nine months ended March 31, 2014. Xbox Platform revenue increased due to sales of Xbox One, which sells for a higher price than Xbox 360. We sold 10.6 million Xbox consoles during the first nine months of fiscal year 2014 compared with 8.9 million Xbox consoles during the first nine months of fiscal year 2013. Surface revenue increased due to a higher number of units sold.
D&C Hardware gross margin decreased $728 million or 45%, due to a $3.6 billion or 98% increase in cost of revenue, offset in part by higher revenue. Xbox Platform cost of revenue increased $2.0 billion, due mainly to higher volumes of consoles sold and higher costs associated with Xbox One. Surface cost of revenue was $2.1 billion for the nine months ended March 31, 2014, which increased due mainly to a higher number of units sold. “

Do the maths: it cost M$ $2.1billion to sell $1.8billion worth of Surfaces… That’s a loss of $300 million. Eewww! Even without charging itself the tax, they can’t compete in the market. How are regular OEMs expected to survive with the high cost of M$’s OS? Chuckle. M$’s business methods are shown to be unsound. Why, then, do most of the world’s businesses toe the line that M$ is the one true source of IT? It’s time the world moved on. M$ is not the answer. They are the problem. M$ cannot even make money providing complete systems using their software. How can any user profit from using M$’s software if the user has to pay extra for the privilege of running the hardware? FLOSS and GNU/Linux are the answers. The world can and does make its own software with no help from M$.

See Microsoft: The MORE Surfaces it sells, the MORE money it loses.

About Robert Pogson

I am a retired teacher in Canada. I taught in the subject areas where I have worked for almost forty years: maths, physics, chemistry and computers. I love hunting, fishing, picking berries and mushrooms, too.
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5 Responses to Surface Loses

  1. luvr says:

    dougman,
    Where I used to work (until last year, when I had to quit for being burned out) Windows Server 2003 was still being actively used. The way I remember it, the main reason had to do with in-house developed .Net stuff that didn’t want to work under 2008.

    They seem to have smartened up by now, driven by skyrocketing Microsoft licensing costs. Apparently, they are getting serious about considering Linux for new developments. Whether they have done anything about their dependence on Windows Server 2003 by now, I cannot tell.

  2. dougman says:

    Who uses M$ Server 2003? No one I know…

    M$ is trying hard to get people off earlier versions, with Windows 7 being the next target in-line. Yes, it is supported for 6 more years, but the average consumer won’t be able to find in store, only Windows 8, which no one wants.

    MicroSh1t is now exploring annual subscriptions, which and as I said last year, falls in-line with their pricing model for Office.

    http://www.extremetech.com/computing/181419-extremetalk-what-would-you-pay-for-a-windows-8-or-9-subscription

    Sales is nice in general, but continual rental provides a higher return, a stable income and also decreases the likelihood of pirating. See where this is going??

  3. dougman’s link:“a January 2014 Tech Pro Research study revealed that about 11% of Windows XP users plan to shift to Linux once Microsoft withdraws support for Windows XP, with only 1% planning to switch to Mac OS X 10.9.”

    We are not seeing that in the web stats but then there are still lots of XP machines running into the darkness.

  4. oiaohm says:

    dougman no need to party yet.

    http://www.pcworld.com/article/2098241/microsoft-stays-the-execution-of-windows-7-pcs-for-business-but-not-for-pleasure.html

    By this Windows 7 is becoming the new XP of this cycle by Microsoft.

    The real mess is not the desktop. http://support.microsoft.com/lifecycle/search/default.aspx?alpha=Windows+Server+2003+R2 its the servers. Yes next year is end of life of 2003.

  5. dougman says:

    With Windows 8 and Surface being an acknowledge dflop, RT a flop, Xbox a future flop, Nokia branded phones another flop and now M$ talking about the demise of the PC, the only thing left them is cloud and tablets.

    With the expiry of XP, Linux will soon overtake OSX.

    http://www.fool.com/investing/general/2014/04/09/exit-of-windows-xp-will-help-linux-leapfrog-mac-os.aspx

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