back to article Microsoft: The MORE Surfaces it sells, the MORE money it loses

The more Surfaces slabs Microsoft sells, the more the Redmond giant has to shell out. Microsoft Thursday trumpeted $494m in revenue made from sales of Surface during its third fiscal quarter. But Microsoft also notched up $539m in costs associated with selling Surface, thereby cancelling out any profits and forcing it to post …

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  1. Vince

    Before the usual "ipad is better, surface is shi*" debate starts, I should point out that many people *want* a Surface, or indeed a Surface Pro.

    Getting hold of them is significantly more difficult - especially if you want them for business and not buying them one at a time from John Lewis etc. I've got customers who want them, and I've had to go to John Lewis more than once to get it because the distributors rarely have stock.

    MS could sell a boatload more if they were actually able to get hold of them...

    Everyone I know with a Surface (and it is a growing number) likes them - I like my Pro 2, but while I like the lighter/thinner form of the RT, it's not good enough as I want full Windows... either way, no good if you can't get them.

    1. Flocke Kroes Silver badge

      Distribution via John Lewis is sensible business strategy

      If Microsoft restricted sales to people calling in person at their shop on Mars, they would lose much less money.

      1. WylieCoyoteUK
        Devil

        Re: Distribution via John Lewis is sensible business strategy

        Finally, a good reason to Buy a surface,

    2. Getriebe

      MS could sell a boatload more if they were actually able to get hold of them...

      This.

      To get them into the hands of sales we have gone to JL and used the corp AMEX. Expensive but effective until someone in the US noticed and told us to go back to hookers, Veuve and the Colombians. They have a GL code for that.

    3. Don Jefe

      Do you know why nobody has the Surface Pros ready to ship? It isn't because your distributor/vendor can't get them, that's 100% bullshit. It's because MS has no incentive to push the tablets in low quantities precisely because of the reasons outlined in this article. your vendor can get all the Surface tablets of any model they like, but not onesey twosey quantities, they've got to get a bunch or commit to a bunch do it isn't worth it for them either.

      The 'economies of scale' thing people talk about, but don't understand, is a harsh mistress. Tiny misses in any link in the product chain result in losses far, far greater than gains from those economies functioning as planned. An abysmally unpopular product with an extremely over the top marketing failure on top, is not a tiny miss...

      The Surface Pro is a perfectly fine, if overpriced, product. But even if it were marked down 75% MS would never be able to cover the losses of the other products in the Surface family. Ever. All those things have to move as planned or none of it works. That's why high investment, high retail cost products are such a risky investment. If it works out the payoff is enormous, if not it costs nearly invincible, super powerful, ultra wealthy CEO's their jobs.

      People simply don't understand how much money it costs to get their kit to them. When full size desktops were still the thing it costs ~2x the price of the components and the manufacture of the PC. That's improved, marginally, with notebooks and tablets because warehousing density is so much higher, but it still costs the manufacturer more to get your notebook to you than it cost to buy the parts and assemble them. Again, that's perfectly fine, if the product is a success, but it's really, really bad if it isn't. Cost of sales drives more companies to death than market shifts, shitty product or despotic nationalization combined. It's a motherfucker at scale and there's nothing to be done about it.

      The smart money would be to pull the product completely from the market. You can't even give them away without losing money at this point, and that's the point. If it costs you more to give something away than to bury them alongside ET then you're screwed. Jettison the product and try again. That's exactly what I expect to happen as soon as the new guy gets sorted and comfy in his new chair.

      1. hugh wanger

        Er.. actually Don Jefe its true, disties didn't have them.

        All the other lines of text you typed (didn't read it all, as you waffle) is largely true. Managing the supply chain is hard, and Apple are experts at it.

        I don't even know what MS's problem was, but I was given a very accurate figure from my Surface 2 order in Jan it wouldn't be in the channel till late March.

        And late March it came. I had an MS suit in front of me one day, and as I moaned about not getting my shiney toy he knew exactly which disties were getting them, in what numbers and what days.

        MS have had a hold up on supply, but its largely as of end of March gone. Surface 2 were harder hit, but they make up 80% of Surface sales. I love mine.

      2. big_D Silver badge

        Race to the bottom @Don Jefe

        I think the figures prove that the Surface Pro isn't overpriced. You could argue the iPad is over priced, due to the (for the industry) very high profit margins. The problem with the the IT market at the moment is that we have seen such competition to push prices down, that the customer expectations are now unrealistic for a high end product that isn't going to sell in high numbers.

        Just look at the people who were saying that the 7" Nexus 7 and Kindle Fire were the right price and Microsoft would have to meet those sub 199€ prices for the Surface (and some even saying the Pro should have been sub iPad prices), even though the BoM costs far exceeded the Nexus or iPad.

        The majority of people can't see beyond the form factor - it doesn't have a keyboard and it doesn't have an Apple logo, therefore it has to cust under 200€... Whereas the reality is, if you can't shift 10s of millions of the things, they are going to be much more expensive than an iPad to produce.

        I have a Samsung tablet (original ATIV SmartPC 500) and it is a great little tablet, but it was expensive, even with its Atom processor, it was still more expensive than an entry level iPad - but it offered much more than the iPad could for that price. And nearly a year and a half later, it is still a great little tablet and I wouldn't swap it for an iPad, because it does what I want from a tablet and the iPad doesn't.

        The market has so concentrated on the bargain basement segment, that it is almost impossible to sell a decent product at realistic prices, if you don't have a half eaten piece of fruit on the cover of the box.

    4. Sr. Handle

      But why anybody buy the surface now? If you wait to the end of the year you can buy one of the jugué pile of unsold tablets with a discount of 50% at least, so my advice is wait to the surface price go around 200 usd and then use wisley that money and buy an ipad or at least a good android tablet.

      1. asdf

        because

        >But why anybody buy the surface now?

        Yeah until I see it can be rooted and you can put a non irrelevant OS on like Android its nothing but a good door stop.

    5. Anonymous Coward
      Anonymous Coward

      Oh, so maybe I should buy one then?

      It would hurt Microsoft, but it would hurt me more.

      It remains on my Win 8 boycott. Call me when Win 9 is out; assuming it explicitly backs away from the Metro nonsense, then perhaps we could be friends again.

    6. countach

      Bull****

      Yeah but I've heard a lot of savvy people argue they they want a surface RT and that surface pro is sh**. Why? Because touch is rubbish on normal windows, RT is lighter and thinner and cheaper with better battery life. In short, RT is a decent tablet, and pro is a Frankenstein monster. Thus MS has succeeded in confusing the market place yet again, and no wonder most people say bugger it, I'll get an ipad at least Apple knows what the f*** they are doing.

      1. big_D Silver badge

        Re: Bull**** @countach

        The Pro is just as touch as the Surface 2, just that it can also run desktop applications if needed.

        We have a couple here, connected to dual 24" displays on the desktop, with BT keyboard and mouse. They make great desktop replacements in that scenario, but on the move it is light and easy to use and with touch and the WACOM stylus, it is great for making notes in meetings.

        I've used my Samsung ATIV in a similar way, although it only supports one external display, whereas I believe someone demonstrated the Pro with something like 4 external displays at the same time. The ATIV, being Atom based was enough for basic office work (MS Office and our ERP system), but wasn't really man enough for the graphics work that I have to do, so I still use my old desktop for that part of the job.

      2. Alan_Peery

        Re: Bull****

        Windows RT doe not run real Windows programs, so I think you've got that backwards.

        In short, Pro is a decent tablet, and RT is a Frankenstein monster.

    7. Pat 4

      Sorry but...

      "Before the usual "ipad is better, surface is shi*" debate starts, "

      What debate??

  2. Anonymous Coward
    Anonymous Coward

    Not sure I'd be impressed as an investor

    It's all very well reinforcing and approaching your vision, and executing behind it, and being accountable to customers, investors and "anybody who knows me", but putting the business bullshit aside isn't his job as CEO actually to make money for the owners?

    1. Don Jefe

      Re: Not sure I'd be impressed as an investor

      No, the CEO's job is to manage the 15,003 wildfires burning in every large company every single day. He's doing the proper thing for any new CEO and establishing the persona that will define him in the future. That's crucial and it's the reason why big investors like to attend quarterlies and annuals in person.

      Being a supreme bullshitter is part of the job as is being a supreme bullshit detector. You go to those meetings to judge how much that person is bullshitting. The numbers don't matter for the past (which is what earnings meetings are), the future is what it's about. You've got to judge how confident the CEO is that the strategies he's implementing will be positive for the future. Early meetings, like this, establish a baseline.

      Sales is responsible for making the money. They are 100% responsible for every penny of every paycheck for every company employee and every penny investors make on their investment.

      1. walnut

        Re: Not sure I'd be impressed as an investor

        This makes little sense. Sure, sales is responsible for bringing in the money, but is the sales teams' fault for the debacle that was Surface RT? Was it sales' fault that Apple (and then Google/Samsung) was able to snag most of the phone market even though Microsoft has been in that space for longer than either one? This is a leadership and a market vision issue, and that takes a lot more than press-friendly rhetoric like "establishing the persona".

        1. Don Jefe

          @walnut

          Yes, the failures of Sales to identify how to move a product then to fail again in identifying how to offload the stalled products in a creative, non loss making way is most fucking certainly on the heads of the senior Sales people; 100%.

          I'm curious. Who are you trying to pin those failures on? The CEO doesn't do product sales anymore (they're doing investor PR when they make statements). The COO is concerned with everything but product sales. The CFO's only concern is making sure the financials meet the goals the CEO set out without (getting caught) breaking any laws. The CIO, normally, knows less than nothing about product sales. So who does that leave on the Bridge of a large company to be be concerned with sales? I'm going to give you a hint and tell you it's the Chief Sales Officer or Executive President of Sales that is responsible for sales. It's kind of neat how job titles and responsibilities match up isn't it?

          The CEO says 'I want (metric)' then goes off to keep the board (most importantly) and investors somewhat mollified while all the other C' go off and figure out how to satisfy that metric. Occasionally, if the company founder is also the CEO, they'll participate in operations or sales from a 50,000ft altitude, but generally they'll have no idea what the company is doing if it isn't on their dashboard or their daily one page executive briefing every day. They don't know, because it isn't their job to know. Hell, unless you're talking a thimble sized company the CEO can't know. There's too much to do. That's what all those other officers are supposed to do. That's why they have those incredibly descriptive job titles.

          Incidentally, firing executives who blame others for their failures is another job the CEO has. That's important for you to remember if you're ever in a position where you're reporting to a CEO. If you're trying to figure out who is responsible for a given thing then that person is in the mirror.

          Go look at a market analysts report on any company's earnings call. The first fucking thing they write about is the appearance of the CEO and the mood in the room. Know why? They aren't being creative, that's for damn sure. They put the CEO appearance, manner of speaking and mood of the room first because that's the sole reason the CEO is showing up for the event.

          The Senior Executives, the Board and major partners knew the numbers a few days ago and the rest of the world will have access to that data a few hours before the call. The information is irrelevant, it's already happened. The way the CEO looks and handles himself will determine if investors have confidence or if they don't think the CEO's goals for the future are viable. Find another Wall Street financial document that begins with a fashion and social column. I challenge you.

          The CEO's sole responsibility is seeing that the Board is satisfied. They do that by making sure investors are satisfied(ish) and they do that by giving the actual company drivers goals that will satisfy the Board and investors. It's everybody but the CEO who is responsible for figuring out how to meet those goals.

          Being a CEO is the hardest job in the world, but it's fun too, if you're cut out for it. You should try if sometime.

  3. Flocke Kroes Silver badge

    So gnomes got their plan wrong:

    Step One: Collect underwear.

    Step Three: Vision, purpose and execution.

  4. patrick_bateman

    its just the apps for the ARM, they are just poor, the worst of the itunes and playstore crap.

    just RSS mishmash feed programs, and just crap..

    where are the wifi scanners, xbmc, plex (free people i just spent 300 on a device that does basic tasks) utorrent remotes, ipcam viewers, lg/samsung tv remote's, eon energy app, bittorrent sync., keepass, squeezer app... just a sample of whats on my android phone.

    The design, feel, performance, great!!!!!

    I want a pro, but £700, hmmmm

    1. Don Jefe

      The ARM stab there is a little misplaced you know. You should have been aiming at the developers of the software, not the processor. But you can't blame software companies for wanting a somewhat stable business.

      As it stands right now there isn't a viable industry sector for 'apps', on any platform. Sure, there are big success stories and individual fringe cases, but no real life in the middle. You've got to have that middle or you've got a speciality, not a sector. It's pretty apparent that middle isn't going to be found in the traditional buggy shit with a pretty dress model most all software uses, but hey! Now we know. But again, that's got fuck all to do with processor architecture.

      1. John Brown (no body) Silver badge

        "that's got fuck all to do with processor architecture."

        I don't think he was having a pop at ARM in general, but specifically at the Surface RT. There's plenty of stuff which runs on ARM and there's plenty of stuff which runs on Surface Pro. But there not much (decent) stuff which runs on ARM Surface RT.

        1. Tom 7 Silver badge

          Theres nothing wrong with ARM

          its just MS cant get their core office stuff to work on it!

          1. Don Jefe
            Joke

            Re: Theres nothing wrong with ARM

            They should do up 'Office Fingerpaint'! That way people who want an MS tablet to do something productive with aren't left out!

  5. ItsNotMe

    "If he were to sum up the quarter in two words it would be “execution and transition.”"

    Ahhh...that would be 3 words.

    1. Flocke Kroes Silver badge

      Dan said it was one word so they took the average

      http://www.brainyquote.com/quotes/quotes/d/danquayle387146.html

    2. Paul Kinsler

      Re: "If he were to sum up the quarter in two words it would be “execution and transition.”"

      hah! - but to sum up in words of just one _sound_ is the best thing to do

    3. patrick_bateman

      Re: "If he were to sum up the quarter in two words it would be “execution and transition.”"

      And isn't a word, like 'it' and 'a'

      A to the L to the I to G!

      1. hammarbtyp

        Re: "If he were to sum up the quarter in two words it would be “execution and transition.”"

        The real question is who is going to be executed?

        I'm sure we all have our favorites....

        1. Don Jefe

          Re: "If he were to sum up the quarter in two words it would be “execution and transition.”"

          If 'and' isn't a word, what is it? I'm genuinely curious. I suppose it could be a bunch of variables, but nobody has ever shown me the formula to address them, that's just shoddy workmanship on the parts of so very many editors.

          Ooh, ooh! If I take public domain classic literature then remove the 'and' from them can I copyright them as new works? I suppose I could just substitute any other three letter word if it's actually a variable. I could do for classic literature what Ted Turner did for classic film!

          1. oldcoder

            Re: "If he were to sum up the quarter in two words it would be “execution" and "transition.”"

            Put the quotes in the right place... The two words are "execution" and "transition".

  6. Anonymous Coward
    Joke

    Why bother with new stuff?

    As a "dated Microsoftie" (as I sometimes like to call myself, I'm a big fan of Windows 7, Office 2010 & Visual Studio 2012 but not so much of the recent products) I have finally seen the light, now I understand... I guess this is Microsoft's way of saying that the Surface is too good to be true (it costs them money) so it really is something which everyone should be buying into.

    Anyway, I'll pass. I just upgraded my Toshiba Satellite laptop (which ran on Windows XP) with FreeBSD 10 (powered by Xfce4, SeaMonkey and LibreOffice) and one thing became obvious right away: although my laptop is quite dated it actually became a whole lot better to work with. Xfce4 is pretty light weight while still providing several options to make your life easier.

    And make no mistake here; this isn't because of FreeBSD perse, but more so of Xorg, Xfce4 and the other projects (which will obviously also run just fine on Linux!). It takes getting used to, sure, and it doesn't easily "connect" (yet!) with my Office environment, but it does make one heck of a business laptop.

    Best of both worlds: with Xorg and LibreOffice I have my portable business environment, whereas the Unix-like environment underneath makes for one heck of a network station (which you'll need whenever you're troubleshooting network problems at a customers place).

    I maybe late to the party, but IMO now really is the best time to start pushing new life into older hardware. Especially with the currently ongoing financial climate.

    1. Jamie Jones Silver badge
      Thumb Up

      Re: Why bother with new stuff?

      Have a thumbs-up from the FreeBSD camp!

    2. asdf
      Mushroom

      Re: Why bother with new stuff?

      >And make no mistake here; this isn't because of FreeBSD perse, but more so of Xorg,

      Yep you are lucky FreeBSD even supports your hardware on a laptop (sounds like it being close to decade old might be why). In fact you may well be amazed how much better even your performance will be if you switch to Linux instead. The only use case I have ever been satisfied with *BSD over any amount of time is a m0n0wall or pfsense firewall/router box.

      1. asdf
        Trollface

        Re: Why bother with new stuff?

        And actually Linux is now better on the router/firewall side as well due to last I saw *BSD not having fq_codel yet (security still *BSD strong suit, that along with obscurity). Still I can respect the *BSD folks and their neck beards. Its takes a certain kind of person to put principles before usability, performance, hardware support and platform software availability (sorry last I saw linux binary emulation was single CPU only). BSD folks are kindred spirits of the Amiga folks.

        1. asdf

          Re: Why bother with new stuff?

          Ok enough being a dick. The BSD folks have given us some good code over the years (OpenSSH, etc) and I certainly like their passion and even ecosystem a lot more than some others. I also believe they will finally clean up OpenSSL as they do security and audits better than anyone. They just often make themselves easy to dislike like the Debian folks on steroids.

  7. Glostermeteor

    Surface rocks

    I have a Surface Pro 2 for work and it rocks. It is an awesome bit of kit.

    The problem is the price, I would not buy one for home because they are so crazily expensive. If MS drops the price it would sell many more of them, because the concept is amazing.

    1. Semtex451

      Re: Surface rocks

      IMHO if they'd only heeded advice and sold the MkI at cost or less in the first place.

      But then again, Ballmer would be still at the wheel.

      1. Don Jefe

        Re: Surface rocks

        Cutting costs can't work once you've put something into production, you're stuck with the choices you've made, or the economics fail, catastrophically.

        The custom tooling and machinery (that's what my company makes) have already been built and (probably) still being paid for when the lines start moving. You've already committed with your manufacturing provider for (x) units and minimum length of timeline. Same with your components, packaging and included accessories vendors. Then you've got the warehouse commits you've made, logistics, reverse logistics, insurance underwriters, regulatory compliance assurance contractors, the list goes on.

        All those contracts have early termination clauses, but when you're dealing with the bastards who brought you Windows ME, Vista and 8 and is notoriously aggressive about licensing enforcement and partner abuse you aren't going to get any favors tossed their way just because they've built a looser.

        As I noted earlier, margins don't scale like losses at scale. You reduce pricing, say 15%, but your margins go down 25-30% or more and climb as cost of sales skyrocket as sales increase due to lower pricing. Bigger reductions cause the margins to fall even faster. It really sucks, believe me, but big losses are the risks of big business. It's a big vicious circle and once you're in you're in. Hesitation or weakening convictions hurt you even worse so get it right before you start the pick and place machines or you're stuck with a situation like MS is in. It's a tough game.

    2. Anonymous Coward
      Anonymous Coward

      Re: Surface rocks

      They are a good, clever piece of equipment. I don't have one, but I have a WIn8 smartphone and as I tell everyone, Win8 is very good indeed in small form factor and with touch. It is just terrible as a desktop interface.

      Microsoft's big mistake was treating the marketplace like their dirtbox. As far as tablets are concerned, MS were a latecomer to the market and an upstart.

      The best thing they could have done was taken a HUGE loss on Surface and cut the price very low and accepted that as the cost of carving out market share against Android and Apple. But they thought they were too good for that.

      1. Tom 13

        @ Flatpackhamster Re: Surface rocks

        I concur about the failure to accurately assess the market, their place in it, and the appropriate strategy. As Don noted, once you've made the initial decision, you have to wait out the consequences. If they cut prices now they look indecisive and confused.

        All that being said, even if they had accurately assessed those options, I'm not sure it would have worked. MS were too focused on the unified code block and shifting to software rental as a business model to do what they really needed to do: separate the two and compete them independently. In the process they honked off far too many people. If they put a real menu tree option back in Windows 8 and made the operational mode an explicit selection made during initial configuration I'm not sure they could undo the damage their intransigence has already done.

  8. Bill 2

    confused

    Sorry - I realise I'm missing something but can someone explain to me (very slowly and patiently) why isn't it a $45 million and $300 million loss rather than $45000 and $300000 loss?

    1. I ain't Spartacus Gold badge

      Re: confused

      I'd imagine it's because the financial reports often miss out the last ,000 (and definitely the .00 on the end) when they're dealing with big numbers. So Dr Evil's One Meellion Dollars would show up as a paltry $1,000...

      So someone was probably typing in a bit of a hurry. Or C+P went wrong.

      To be fair, their loss on the last quarter was proportionally less than the losses in the previous 2, even if it was on lower sales. But with the Christmas period on there, that's to be expected. They might even manage to break even on Surface next year, who knows?

    2. Anonymous Coward
      Anonymous Coward

      Re: confused

      Cause MAGIC my friend -- seriously, I would like to know the answer to Bill 2's post as well.

  9. Phoenix50

    Ah Gavin,

    It wouldn't quite be the same Microsoft financial statement without you pissing all over it.

    Between you and Neil McAllister you never fail to darken my Internet with your glass-half-full attitude to the biggest software company in the world.

    Yes, that's right, they're STILL the biggest software company in the world and in almost every measurable way, they're still in very good financial health.

    Sorry about that.

    1. Anonymous Coward
      Anonymous Coward

      Re: Ah Gavin,

      What part of M.O.N.O.P.O.L.Y. do you not understand?

      1. Don Jefe

        Re: Ah Gavin,

        M.O.N.O.P.O.L.Y. means nothing to me. Regardless, it's terribly, terribly poor form to have an acronym with an even number of letters other than two.

      2. Anonymous Coward
        Anonymous Coward

        Re: Ah Gavin,

        > What part of M.O.N.O.P.O.L.Y. do you not understand?

        It's usually the Y that gets me.

      3. h4rm0ny

        Re: Ah Gavin,

        >>"What part of M.O.N.O.P.O.L.Y. do you not understand?"

        The part where it relates to Microsoft in the tablet or laptop markets?

    2. Tom Maddox Silver badge
      Headmaster

      Re: Ah Gavin,

      None of which changes the facts that they lost money, which is big news in itself, and that the Surface Pro 2 sales are in the toilet and are dragging down Microsoft's profitability. Don't let facts get in the way of your blinding fanrage, though.

      1. localzuk Silver badge

        Re: Ah Gavin,

        Its funny that people focus on a single product line and say "see, it lost money". People don't do that with other retail outlets where loss-leaders are commonplace.

        The thing about the Surface range is that they are the gateway to an ecosystem that Microsoft is attempting to create. They are trying to build a world around their app store, music store and the like. That's where the real money is - software. Just like Google and their Android OS. It gets people to use their app store, it gets people to use their search tools, their email system etc...

        My view has always been that Microsoft have been going about their Surface 'world' wrongly. The devices should be cheap. So cheap that its silly not to buy them. There should be very nice incentives for developers to get onto the platform too. That way, Microsoft can make the money where it matters - their core business of software and services.

        So! Long may the Surface lose money for Microsoft. And hopefully, long may its app store make it plenty instead.

        1. Tom Maddox Silver badge

          Re: Ah Gavin,

          So, to recap the article, which you clearly didn't read:

          Microsoft lost $45 million due to $300 million in losses from selling Surface. In short, Surface losses ate up all of Microsoft's profits and then some. Do you understand?

          "So! Long may the Surface lose money for Microsoft. And hopefully, long may its app store make it plenty instead."

          The very existence of Microsoft fanboys is puzzling to me. Why do you care whether Microsoft, the company, is successful? Surely the company should stand or fall on the quality of its products; why do you identify with them to the point that you care about the company as an entity?

          1. localzuk Silver badge

            Re: Ah Gavin,

            @Tom Maddox - you may want to go and do a bit of reading elsewhere. Microsoft made a net profit of $5.66bn last quarter. This article is discussing its Surface sales only. The idea that Surface could eat up their entire profits is hilarious quite frankly.

            I'm not a fanboy either. I hate many aspects of Microsoft's products (as a quick look at my many ramblings online will happily confirm). However, I am a big fan of the Surface Pro line, as it is a great form factor in the education market (where I work).

            1. Tom Maddox Silver badge
              FAIL

              Re: Ah Gavin,

              @localzuk: Crap, you're right, I misread the article myself. Sorry for being a condescending douche, in that case.

          2. Pookietoo

            Re: why do you identify with them

            Usually because they earn a living based on people using MSFT products, or have a pile of MSFT shares.

        2. jonathanb Silver badge

          Re: Ah Gavin,

          The Surface is Microsoft's answer to the iPad, and the iPad makes huge amounts of money for Apple, and while Apple are losing market share in the tablet market, they are losing it to Android manufacturers, not to Microsoft.

        3. Tom 13

          Re: gateway to an ecosystem that Microsoft is attempting to create.

          Umm, I think that's the crux of the problem.

          MS doesn't think they can continue their numbers with their old software model. So they bet the farm on the new ecosystem. And the new ecosystem is hemorrhaging money in a way that can't be corrected, even at scale.

  10. fishman

    Between a rock and a hard place.

    The problem with Surface is that the android and apple tablets are better and/or cheaper than the Surface as media consumption devices, and for "getting real work done", laptops are often much better than a Surface.

    1. Don Jefe
      Thumb Up

      Re: Between a rock and a hard place.

      Jesus, Fishman (Ha! I wonder if that's what Jesus put on his census forms :) with a single statement you've just freed up petabytes of storage space that had been filled with millions of overly complex analyses of why the Surface failed.

      Normally I would commend your precision, but Western Digital hit squads will certainly have accomplished their mission before this message gets posted.

      1. MigMig

        Re: Between a rock and a hard place.

        The MS Surface IS a laptop. Sorry.

  11. Anonymous Coward
    Anonymous Coward

    I had a quick look online, I could go and buy an Asus T100 (32 GB) for $30 less that a Surface 2 RT (32 GB)

    Unless the highest resolution is the most important thing for you, the T100 is a better deal... and it is a full Windows OS.

  12. Herby

    Lose a little on each one...

    ...and make it up in volume.

    In a previous life I actually had a sales droid agree that it was a sound business plan. Someone at Microsoft seems to agree.

    That being said, where is the "killer app" that is being sole for enormous profit from the Microsoft store? Which everyone will add Microsoft has a store? Who knew.

    1. localzuk Silver badge

      Re: Lose a little on each one...

      It is the same business plan as that used for entering the game console market - and it worked very well for them there!

  13. Anonymous Coward
    Anonymous Coward

    Good business maxim

    Revenue is vanity - margin is sanity.

    1. Getriebe

      Re: Good business maxim

      Andreessen Horowitz beg to differ

  14. ChrisInAStrangeLand

    How about building a tablet.

    If Microsoft built a Surface Atom with a nice IPS 1080p screen they'd be raking in cash. None of the Windows competition is well made, it's poorly assembled plastic with netbook screens, and the Pro is just too heavy for a tablet.

  15. Tom 7 Silver badge

    Perhaps they should put android on it

    and then try suing google for a profit?

  16. Jess

    A cunning plan.

    Make a device so expensive that Microsoft's fans won't buy it, make a loss selling it so the only people who buy it are Microsoft haters, who want to cost Microsoft money.

    The idea is they like it so much that they are converted.

    How could it fail?

  17. Vociferous

    That's because Microsoft isn't selling slabs.

    They're selling a walled-garden ecosystem.

    1. hugh wanger

      Re: That's because Microsoft isn't selling slabs.

      @Vociferous

      That's because Microsoft isn't selling slabs.

      They're selling a walled-garden ecosystem.

      Explain Walled? (My money is on some anti MS sentiment and nonsensical tripe)

      1. Vociferous

        Re: That's because Microsoft isn't selling slabs.

        Microsoft Store only sell Metro software, and is the only place to buy Metro software. While Desktop still exists the Garden wall isn't complete, but that wont last. Microsoft are selling slabs at a loss to build market share.

        It wont work, Google has already won the battle for mobile devices, but that's why Microsoft does it.

      2. Tom 13

        Re: That's because Microsoft isn't selling slabs.

        Vociferous nailed it.

        Right now there are two models for making money in the tablet market:

        1) Walled garden combined with overpriced software.

        2) Spying on everybody for your actual revenue generator which is selling ad words.

        Apple have the first one pretty much sewn up. There are a limited number of rubes willing to part with that kind of dosh just to look cool. They own all of them.

        Google are the second. So far nobody's been able to figure out a way to overcome their huge barrier to entry for the market.

        MS was trying a third option: toll master on just a walled garden without the overpriced hardware. It's what the whole Metro thing was really all about. The desktop thingie was just supposed to be a legacy mode while they moved you to the new ecosystem. If you assume that as your driving directive, all the other mistakes they've made make sense. Not cents or dollars, which in business is nonsense.

  18. Ken Darling

    What on Earth is...

    ... Microsoft Thursday? How often does Microsoft Thursday come around? Weekly, monthly, once in a blue moon?

    Perhaps Microsoft Thursday is the new name for Patch Tuesday.

  19. itzman
    Pirate

    Whlst the fact that Redmond loses money..

    ..is the best reason yet to buy a Surface...

    I am afraid its still not a good enough reason.

  20. jnffarrell1

    MS will lose another $300M on Surface

    Keeping Microsoft services alive until it transitions to the cloud, accepts the thin client (now equivalent to a 1990's super-computer in a pocket); prepares Office Apps that play well on the web and accepts that even in the US grannies with laptops only use them to "see" their families. A large majority of grannies hate Excel if they use it at all.

  21. Smoking Gun

    I love my Surface Pro. My line manager had to ask the company to take out a bigger loan to pay for all my accessories for me it's an excellent all-rounder and does the job of the corporate iPad (and much better if I say so) and laptop that I previousy had so all told is a net gain.

    I just couldnt tell the boss this as my daughter needed an iPad to watch her Peppa Pig videos.

    Price is a problem but can be justified, accessories are for the lavish, distribution was a shambles and remains so until this day.

  22. Anonymous Coward
    Anonymous Coward

    faked Xbox numbers

    Sell in. Not sell through with stores overloaded with unsold stock, there is a huge gulf between the two.

    Many are now questioning how Microsoft are continuing to pull the wool over shareholders eyes.

    http://www.forbes.com/sites/insertcoin/2014/04/25/microsofts-xbox-one-sold-just-1-2m-units-to-retailers-in-q3-dips-below-xbox-360-rate/

  23. MigMig

    It's amazing how it took almost 2 years for MS to undo the damage done by Apple Marketing to the point (the masses) have no chocie but to accept that the SP2 is a superior softaare/hardware machine to an iPad (at least that's something). Now, based on the responses on this article, the focus has now shifted towards sales/marketing trends. Hey, at least that's progress.

    In reality, people who buy SP2's don't give a shit about what "The Register" commenters think and their ideologies. They want to get work done even at the expense of not being able to play the latest video hogging games or being the first on getting a hold of flappy birds apps. Don't get me wrong, some of us do find entertainment on being reminded on how stupid the multitudes are as they feverlishly fight their irrational battles, but that's as far as we go. Apple's Marketing iron grip has really gotten the best of you and that serves (at least) as a good psychological study - just as KIA did with their dancing hamsters approach as well as California Raisins - leading to their mass success.

    You people are disgusting.

  24. SEDT

    Would not want to be working for them

    He uses the words 'Execute' and 'Execution' an alarming lot

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