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It’s Official: Microsoft’s Surface Has Lost More Money Than It Made!

It’s Official: Microsoft’s Surface Has Lost More Money Than It Made!

It’s no secret that Microsoft’s Surface line of tablets (or Windows RT tablets in general) haven’t exactly been selling like hotcakes – despite several being priced at rock-bottom prices, many Windows 8 tablet manufacturers slashing their prices in an attempt to boost sales, and even Microsoft’s own decision earlier this month to slash Surface RT prices by a full $150 in a desperate attempt to save their new Windows tablet platform.

Ballmer Surface OopsThe company is also rumored to be preparing a smaller version of the Surface RT aimed at competing with the iPad mini, with pricing as low as $250. Microsoft has become almost embarrassingly desperate in their attempts to pull at Apple’s market share strings. And considering that the company took a $900 million hit on Surface RT sales, it’s not hard to see why they might be so desperate.

Following Steve Ballmer’s admission earlier this week that the Surface RT has been very disappointing in terms of sales (“we built too many!”), Microsoft’s latest annual financial report only cements the failure of their Surface tablets even more.

The Wall Street Journal reports:

Microsoft for the first time has said how much revenue its Surface tablets have brought to the software company. The number, for the year ended June 30, was $853 million–a smaller amount than the$900 million charge that Microsoft recently took on on the product line.

Microsoft disclosed the Surface figure in its annual financial report, which was filed Tuesday with the Securities and Exchange Commission. The company started selling Surface last October, but Microsoft previously has been coy about how the device has sold.

The report goes on, leading to this fascinating gem:

At the revenue Microsoft disclosed for Surface–and assuming all units sold were the $499 Surface RT–unit sales would at most have been 1.7 million in the 12 months ended in June. By comparison, Apple sold 14.6 million iPads in a single quarter ended in June.

That’s a VERY big assumption – in reality, it’s unlikely that all of the units sold were the $499 Surface RT. As such , the actual number of units sold is probably much lower. As for Microsoft’s response, the company is unsurprisingly putting all their chips behind the recently announced $350 price cut for Surface RT tablets (ignoring that fact that all Windows 8 and Windows RT based devices, including the Surface Pro, are failing just as badly).

Here’s a statement from Microsoft sent to WSJ:

“We recently reduced the price of Surface RT by $150,” he wrote. “We’re confident this pricing adjustment, along with our dramatically expanded geographic availability and distribution channels, will help accelerate Surface adoption and position us better for long-term success.

“Surface is currently available in 29 markets and more than 10,000 retail locations. We also broadened the availability of Surface to our business and institutional customers through a new channel-expansion program that allows commercial customers to purchase Surface devices from authorized resellers in the U.S., and we will be expanding this program to additional countries in the months ahead.”

So, in short, Microsoft made less money ($853 million) from their entire Surface line of tablets than they lost from pitifully low Surface RT sales. That’s downright embarrassing.

I’ve said it before – but maybe it’s time for Microsoft to consider that the real problem with the Surface isn’t it’s price (or it’s size) – it’s the Windows 8/Windows RT platform. Consumers just aren’t in love with Microsoft’s shiny new platform, and developers just don’t want to develop software for the platform, despite the face that Microsoft has gone as far as bribing developers to do so… but as always, only time will tell.

Rene Ritchie’s words have never rung more true: when it comes to tablets, Windows isn’t a feature – it’s a liability.