Eugene Kim writes in a TechSecurityUpdate.com piece:
Microsoft is bleeding cash from its Surface tablets and may soon have to consider shutting down the business altogether, Computerworld's Gregg Keizer wrote in a compelling piece against the Surface.
Keizer did his own back-of-the-envelope calculation to estimate that Microsoft has lost $1.73 billion since the Surface's debut in 2012. The total loss for FY2014 was $680 million, and it was $1.049 [b]illion for the year before, according to Keizer.
His calculations also revealed that in the June 2014 quarter alone, the Surface had lost $363 million, the largest quarterly loss for the Surface since Microsoft started releasing quarterly revenue figures.
He said some of the losses was due to massive write-offs from the Surface Mini, which never hit the market despite being ready for production, out of fear it would not sell well.
The loss also included some of the manufacturing cost of the Surface Pro 3, which only started to sell on Aug. 1. Because of its late release, only a small portion of its sales were included in the June quarter's earnings.
Keizer argued $1.73 billion may not be that big of a loss for a company as big as Microsoft, but it's still a sizeable figure considering it represented 3% of Microsoft's FY2014 gross margin. He said Microsoft's year-over-year revenue growth would have been almost 1% had the Surface unit broken even last year.
Related Stories
Bill Belichick is sticking to his old fashioned ways on one technological front. After the image of the New England Patriots coach slamming a Microsoft Surface tablet on the sidelines in a Week 4 game against the Buffalo Bills went viral, Belichick explained Tuesday why he is fed up with the product. "As you probably noticed, I'm done with the tablets," Belichick said. "They're just too undependable for me. I'm going to stick with pictures, which several of our other coaches do, as well, because there just isn't enough consistency in the performance of the tablets. I just can't take it anymore."
The normally reserved Belichick, who previously has expressed his frustration with tablets, explained his stance for more than five minutes, harping on the unreliable nature of technology. [https://twitter.com/ZackCoxNESN/status/788411998006603776/photo/1]
Microsoft has responded:
"We respect Coach Belichick's decision, but stand behind the reliability of Surface," the statement read. "We continue to receive positive feedback on having Surface devices on the sidelines from coaches, players and team personnel across the league. In the instances where sideline issues are reported in NFL games, we work closely with the NFL to quickly address and resolve."
Also at ESPN, NYT, TechCrunch, and The Seattle Times.
Previously:
Microsoft has Lost $1.73B on the Surface Since its Debut in 2012 (August 8, 2014)
MS Pays NFL $400M To Use Surface, Announcers Call Them iPads
Surface Pros Lose Wireless Connectivity in NFL Championship Game
(Score: 4, Insightful) by Covalent on Friday August 08 2014, @01:58PM
...is on TV. They must have spent a fortune advertising the thing, but I've never actually seen one "in the wild."
At the local mall, the Apple Store and the Microsoft Store are very near to each other. The Microsoft Store is modeled to look almost exactly like the Apple Store. But nearly every time I walk by, the Apple Store is packed...and the Microsoft Store is packed with employees, not customers.
IMHO, the problem is price. Why buy an unknown entity with a dubious track record when you could buy a presumably better product at the same price. For a lower price you might try something else, but all things being (about) equal, you'll go with the proven winner most times.
You can't rationally argue somebody out of a position they didn't rationally get into.
(Score: 1) by Lazarus on Friday August 08 2014, @02:21PM
A friend has an RT surface, and I'd get a Surface Pro if only Microsoft hadn't failed hard by putting the windows button right where a right-handed person rests their hand while drawing. If there's a next version, and they fix this major design flaw, I'll probably get one.
(Score: 2, Interesting) by Ethanol-fueled on Friday August 08 2014, @02:31PM
As an American I've noticed that one place in particular where Microsoft advertises the Surface pretty heavily is during NFL games, alongside the manly-man Chevy trucks and Tostitos dip.
I always laugh at the commercials shown during NFL games but never tell anybody why because in a bar full of jersey-wearing drunks, it's not a good idea say that those commercials pander to an audience of Cro-Magnon knuckle-dragging mouth-breathing beasts who have given up on being intelligent and have instead found their security in phoney-tough machismo.
(Score: 3, Insightful) by tempest on Friday August 08 2014, @05:49PM
The thing about that audience? If all tablets are confusing to them and do basically the "same stuff", they almost always go for the cheapest option. MS tablets were priced like iPads last I saw. Hardware, support, device locking (bios), pricing - pretty much everything about this product is wrong.
(Score: 1) by Ethanol-fueled on Friday August 08 2014, @06:22PM
Out there in the real world, Apple products have a reputation for being girly or overtly nerdy. Overt nerdiness is viewed my many burlier men as being "weak" and/or "effeminate." The Surface ads portray average guys with hot wives and kids doing average things, you know, the life of a normal man.
Not just 2 guys wisecracking against a white background with not a single trophy wife or progeny in sight, like in Apple commercials.
The target audience for Microsoft surface tables are the kind of guys who take pride in the fact that (1) they were able to reproduce and (2) they have hot wives they bang every night. Those are worthy tradeoffs to being so willfully ignorant that those kids are the ones who have to show them how to use their Surface tablets.
(Score: 1) by Ethanol-fueled on Friday August 08 2014, @08:15PM
Put more simply - Apple is about being "special." Microsoft is about being "just one of the guys."
// lame self-reply
(Score: 3, Informative) by spxero on Friday August 08 2014, @08:36PM
That's an interesting perspective, because at my company it's quite the opposite. We are in the farm/ranching industry and work quite a bit with those tough-types you mentioned previously. Our CEO was a developer for some time and is a very Windows-based decision maker. To him, if Microsoft makes it, it's the best possible iteration of that product. When he came on board as CEO (after retiring a few years earlier as the SVP of Systems), he ordered the Surface Pro 2. After four months of use he came back and asked for an iPad Air instead. I prodded him a bit about the decision, and his two reasons were ease of use (e.g., the surface was near impossible to use without a keyboard) and iPad envy from all the other Executives that had an iPad.
(Score: 2) by tibman on Friday August 08 2014, @03:21PM
All of my fellow dotnet developers have them. The CTO uses his heavily and it seems to serve him well. But he probably just uses it as a more portable laptop. Come to think of it, i think they all have windows phones too : /
SN won't survive on lurkers alone. Write comments.
(Score: 1, Funny) by Anonymous Coward on Friday August 08 2014, @06:07PM
Wow the sales to you guys must have quadrupled their quarterly sales figures!
(Score: 2) by tibman on Friday August 08 2014, @06:41PM
Yeah, makes me wonder if most of the sales are to people whose income depend on Microsoft.
SN won't survive on lurkers alone. Write comments.
(Score: 0) by Anonymous Coward on Friday August 08 2014, @06:44PM
Must be. Can't imagine why anyone who isn't heavily locked-in to a Microsoft stack would ever buy one. Average consumers fon't care and any other mobile developers only care about iOS and then Android.
(Score: 4, Informative) by PizzaRollPlinkett on Friday August 08 2014, @02:20PM
I never understood who the target customer is for the Surface, either the crippled one that won't run Windows apps or the real one.
The crippled one that won't run Windows apps was part of MS's grand strategy to create a "cloud" version of Windows that ran only Metro apps, not real Windows programs. I have thought since day 1 when Metro was announced that MS wanted a consumer version of Windows that drove web traffic to Bing and their other web services. You ever tried to create a local login account on Win8? Almost impossible even if you know what you're doing. They wanted to monetize their captive audience of Windows users. Before Win8 failed miserably, I thought the goal was for Win9 to be split into "OEM" and "legacy" versions - the first would run only Metro apps and be for people who bought PCs at Wal-Mart or Office Depot, and the second would be outrageously expensive so consumers could not afford it, but be designed for enterprises with legacy Windows apps (with volume discounts making it about the same price as always). MS wanted to wean consumers off of traditional Windows. Whatever they intended, the abysmal failure of Metro changed their plans.
But the real Surface was outrageously expensive for what amounts to a netbook. Who was the target customer for this thing? Anyone who had money and wanted a tablet could (and did) buy an iPad. Anyone who didn't have money wouldn't buy the Surface.
For the same money you spent on a Surface (with its optional extras like a keyboard), you could get a primo laptop. For that matter, when Win8 came out, I got an Asus laptop with 15" screen and a core i5 for $550.
Anyone who wanted to do real work on a computer would get a real laptop with a keyboard and big enough screen to use. You could get a real laptop cheaper, and it would be a better machine for your needs. (Some software developers got a Surface, but... Visual Studio on that tiny screen? I actually tried running Emacs on a netbook once and it was a horror, and it's less cluttered than VS.) If you want to mess around on a tablet, the iPad (a symbol of overpriced conspicuous consumption!) is cheaper than the Surface.
The Surface always reminds me of the car Homer Simpson designed. (Sorry, that's not a Star Wars simile, but I can't always make it fit.) It's a big mess of misfeatures no one wanted.
The Surface seems like the ultimate design done by professional management. Microsoft created the computer that they wished people would use, one that has a walled-garden app store, tracks all the user's activity by (all but) requiring them to log on to MS's cloud, can't be upgraded, and is overpriced. It's like a manager's checklist of what a software company wants. But users rejected it.
(E-mail me if you want a pizza roll!)
(Score: 2) by present_arms on Friday August 08 2014, @02:24PM
I think the surface was designed by committee. Got some good ideas on it, however there would be no way I'd get the RT version, and I'd only get the pro to put a distro on, and for that it's too expensive.
http://trinity.mypclinuxos.com/
(Score: 3, Interesting) by Thexalon on Friday August 08 2014, @02:42PM
This is, as usual, just Microsoft copying Apple, who makes a great deal of cash off monetizing their captive audience of iPhone/iPad users.
Here's what Apple and Microsoft and to a lesser degree Google have:
- User buys hardware from $company with an OS from $company pre-installed
- User cannot change OS's
- Only source of non-$company software is an "app store" run by $company
This means that $company has prior restraint on all software run on their users' systems, and gets a significant cut of all profits from all companies creating software for their hardware/OS combo. No new value is really created by this, all that happens is that money that would be going to the company that wrote the software is instead going to $company (the software company accepts this because it's the only way to get purchases from users of devices made by $company).
Notice also the trend towards difficult-to-modify "devices" over flexible consumer PCs with easily-swappable hardware.
Richard Stallman is looking more and more right every day.
"Think of how stupid the average person is. Then realize half of 'em are stupider than that." - George Carlin
(Score: 3, Insightful) by PizzaRollPlinkett on Friday August 08 2014, @03:54PM
At least MS is honest: they use proprietary software created in their silo of corporate development tools to make a walled garden. They've never pretended they care about freedom. What rankles me about Google and Apple is that they exploit free software, designed and built by people who want free as in freedom, to create the exact opposite, the least free computing that we have ever seen.
(Now, yes, Android is open source. But in the bad Microsoft kind of way with Google putting functionality in Google Play services.)
(E-mail me if you want a pizza roll!)
(Score: 0) by Anonymous Coward on Saturday August 09 2014, @05:52AM
At least MS is honest
Wow, there's 2 words that don't belong in the same sentence.
What rankles me about Google and Apple is that they exploit free software
Google is in the advertising business.
Apple is in the hardware business.
The fact that software is a means to an end should startle no one.
...and as long as they don't abuse the license, bitching about the use of the software to meet their goals is just bad form.
(See e.g. Tivo for an example of following the letter of the license while abusing the spirit.)
OTOH, M$'s primary business has been selling EULAs for ones and zeros that have a marginal cost of roughly $0.
the least free computing that we have ever seen
It's kinda cute the way you put words together in a way that ignores 4 decades of abuse, anti-competitive behavior, and criminal activity.
-- gewg_
(Score: 2) by elgrantrolo on Friday August 08 2014, @03:49PM
Call me shill if you want, but I will have to challenge that idea that RT is crippled and that the real one is not good enough.
When I go to the Windows Store, I see all apps I like with a ARM variety. It sure looks ready for people to have Windows boxes with long battery life. You can't side-load stuff? Well, it made good business sense for Apple and we've been moaning about Windows malware for ages - now they've taken action.
Don't like it? Kickstart a campaign for a new device with Linux on ARM, maybe with the growing market it will do better than the Nokia N900 did back in the day
The Surface PRO is a funny hybrid, a proof of concept, a reference model, etc. It shows Windows 8 x86 on a touchscreen machine and does not harm the OEM partners much. My next tablet to retire the Nexus 7 is likely to be the Asus Note 8 with Windows x86. The reason? Firefox + adblock + ghostery. The market is bigger than ever, I don't think that there's only one manufacturer or one formula to make good machines.
(Score: 3) by emg on Friday August 08 2014, @04:37PM
"My next tablet to retire the Nexus 7 is likely to be the Asus Note 8 with Windows x86. The reason? Firefox + adblock + ghostery."
You, uh, do realize that Firefox runs on Android, right?
(Score: 2) by tathra on Friday August 08 2014, @06:13PM
having a program run on android doesnt mean much. to make it clearer, you should have said that firefox for mobile runs add-ons, unlike pretty much every other mobile browser. as much as i hate firefox, i had to install it just so i could have ghostery, adblock, and tor on my phone.
(Score: 2) by TK on Friday August 08 2014, @06:44PM
That and Custom User-Agent String. Sometimes you don't want to be redirected to their "mobile friendly" website.
The fleas have smaller fleas, upon their backs to bite them, and those fleas have lesser fleas, and so ad infinitum
(Score: 2) by elgrantrolo on Friday August 08 2014, @08:16PM
it doesn't run, it walks. slowly. the whole browsing experience on the Nexus 7 (original one, from 2012) is poor. probably like IE was years ago, but at least has tabs. Advertisers ruined the www like they did to TV before. Firefox + adblock + ghostery ends up being the killer app for Windows x86 in a iOS and Android world. Who'd have thunk it?
(Score: 2) by gman003 on Friday August 08 2014, @04:00PM
Microsoft didn't understand their target customer either.
The Surface RT could have worked as a corporate tablet, if it worked better with a managed corporate network and didn't have the Office licensing issues. But it never took off there, because it had none of the advantages Windows could have given them, and all the disadvantages of a new, incompatible platform. They seem to have rightly dumped this one - I haven't heard of a Surface 3 RT.
The Surface Pro did find a niche in artists. The Wacom integration and ability to run full versions of Photoshop or whatever was apparently just what that group was looking for in a tablet. But it's a small niche, and Microsoft is still building and marketing it like it's a mainstream product, which is a great way to lose a lot of money.
(Score: 1) by Gertlex on Friday August 08 2014, @04:46PM
An extension of that niche is science/math. I bought the original Surface Pro just in time to do my Master's thesis, and the pen capabilities are fantastic. It's kind of the final step in a paperless desk. Instead of having pages and pages of derivations and the like, I have much easier to erase and colorful writing all in one device. It continues to get used in this way at work as well.
But it's definitely not my primary device, and it really is a $1000 pad of infinite paper... But at the same time, it's great that I can (and occasionally do) do other things with it as needed, unlike say with the toy commonly called an iPad.
(Score: 2) by TK on Friday August 08 2014, @07:11PM
How's the learning curve for it? The only thing interesting to me about tablets is the possibility of using them with a stylus, and MS's seems to be the only one that's sensitive to tip pressure.
I'm not about to drop a grand on something so fragile...maybe if it came with Photoshop...
The fleas have smaller fleas, upon their backs to bite them, and those fleas have lesser fleas, and so ad infinitum
(Score: 1) by Gertlex on Friday August 08 2014, @09:17PM
I don't do art, but rather just writing in the full version of OneNote. There's a few tricks to learn, but no curve, per se.
(Score: 2) by tangomargarine on Friday August 08 2014, @07:28PM
Emacs...on a Windows...netbook. I'm pretty sure I got cancer just from thinking about that. Well, at least it's not a tablet or Kinect or something...imagine shouting key chords at an Xbox.
"Is that really true?" "I just spent the last hour telling you to think for yourself! Didn't you hear anything I said?"
(Score: 2) by c0lo on Friday August 08 2014, @02:23PM
https://www.youtube.com/@ProfSteveKeen https://soylentnews.org/~MichaelDavidCrawford
(Score: 4, Interesting) by ngarrang on Friday August 08 2014, @02:57PM
One of my employees (upper mgmt) just had to have a Surface Pro 3. It couldn't be the Dell or Samsung tablets (with keyboard cover) I currently buy. Nope. So, I acquiesced and placed the order. There is NOTHING about the Microsoft Surface that sets it apart from the competition. The screen? It looks as good as the rest; clear, bright, legible text. The battery? Not any worse or better under active use. The weight? Pretty much the same. The performance? All core i7-based tablets I have tested are equally fast. They all have mSATA SSDs in them, so that is also equal. Only the price differentiates the Surface...it is more expensive.
Maybe Microsoft is trying to create an up-scale image? If so, I fail to see the point. There is nothing up-scale or luxury about computers. Apple iPads are over-priced for what they do, with people paying for the Apple logo. They are all made from the same components, screens and other technologies.
Maybe it was to push RT, a platform was absolutely closed for JUST Microsoft? RT sucks. Anyone that says otherwise either has not used it, or is defending mis-spent money in some vain attempt to recover their pride.
I can see Microsoft continuing the line despite the losses because of corporate pride. They will burn through cash, lowering stockholder value and potential dividends, until it costs them so much they HAVE to end it. Given how much cash they bring in, it will be a slow death spiral.
(Score: 4, Interesting) by Hairyfeet on Friday August 08 2014, @03:25PM
The problem is MSFT doesn't seem to realize their core demographic cares a LOT about price. Being in retail I can tell you the consumer price for a Windows system should be between $350-$600 as that is the "sweet spot" where most users buy, the only real market above that is the gamers and even they like low prices, ask any retailer that sells gamer boxes and they'll tell you they sell more i3s and AMD quads than uber-rigs.
The entire strategy seems to be "pretend to be Apple and you'll be apple" when IRL that goes over about as well as Walmart jacking their prices 5000% and saying that makes them a competitor to Macy's.....it don't. Those that spend that kind of money on a tablet is gonna by Apple while Windows buyers aren't gonna pay that much for a tablet/convertible, not when they can get a quad AMD laptop nicely loaded in the $450 range.
ACs are never seen so don't bother. Always ready to show SJWs for the racists they are.
(Score: 1) by danmars on Monday August 11 2014, @03:45PM
Almost true, but not quite; they do have 1 good feature.
Their stylus performance on their Pro models is very good. The Surface Pro 2 was apparently good enough that Wacom dropped out of the Surface Pro 3 because Surface Pro 2 was eating into their Cintiq profits. At least, that's what I've heard online.
(Score: 1) by Chillgamesh on Friday August 08 2014, @03:15PM
A billion dollar loss doesn't mean the same thing to microsoft as it does to most companies.
Sure they invested a large amount of money into tablets. But you better be damn sure they did a risk analysis on it before hand. At worst they risk losing a bunch of money, not a big deal to microsoft who is absolutely literally "Too big to fail". But if it worked out and surface usurped the ipad market, even possibly grew it, they'd make many more billions than they lost.
It is worth noting, that despite the fact that MS's investment in surface hurt their profit, their revenue for 2013 was up 10% from the previous year. I conclude this is just a case of using some revenue to invest in a technology that could have resulted in a huge amount of revenue for the company.
Investments in new tech always carry some risk. I think it was the nature of the market that made the surface fail, not MS's implementation of it.
(Score: 4, Informative) by emg on Friday August 08 2014, @04:39PM
A billion here, a billion there, and pretty soon you're talking real money.
As far as I can see, Microsoft's only successful hardware venture was Microsoft mice, which they're now trying to eliminate by pushing a crappy touchscreen interface on Windows users.
(Score: 2) by hamsterdan on Friday August 08 2014, @05:40PM
"At worst they risk losing a bunch of money, not a big deal to microsoft who is absolutely literally "Too big to fail"."
So were GM, Chrysler, Bank Of America...
Tablets are replacing laptops (less licenses sold), a PC built in the last 5 years is still a really good machine (people have less incentive to upgrade, less licenses sold), and businesses are switching to Linux & Open Office more and more.
So no, Microsoft is not too big to fail. It will just take longer to die. Hopefully the new CEO will do a better job than Ballmer...
(Score: 1) by Chillgamesh on Friday August 08 2014, @07:29PM
I guess i should qualify what i mean by "too big to fail".
In the case of major banks and car manufacturers, there are alternatives. You can put your money in a different bank, or buy a car from a different car make.
But what is there to replace microsoft's products?
(Score: 1) by ramloss on Friday August 08 2014, @09:19PM
Your post got me thinking (not for the first time) what would happen if Microsoft disappeared today?
Suppose that MS vanishes in thin air, nobody buys its IP and it's lost forever, all products cease to be sold, all online content disappears. How much would it hurt? My favorite theory is "not so much".
First, it is next to imposible for the entire company assets to disappear, somebody would end up buying part of their stuff and continue developing/selling it. And remember that those products that people already bought would continue to operate barring activation snafus. Worst case there would have to be a very painful migration, but what could be the alternative?
I think that we'd end up buying "MS Mice and Keyboards" by Lenovo and using open/libre/whatever/office, linux/os x/freebsd/android etc. and there certaninly would be very costly transitions for other products and even use of pirated versions in extreme cases but I don't envision that as a "to big to fail scenario"
(Score: 2) by hamsterdan on Monday August 11 2014, @05:58AM
For most people, the alternative would be either tablets, or Macs (even Linux)
The vast majority of people use them for Facebook/Youtube, email and other internet stuff.
The only reason why they use Windows is because they can pick up a PC in about any store.
Businesses could run into problems as some very specific software only runs on Windows (sometimes specific versions) or Internet Explorer (specific versions too), but that's changing.
Since my mom got her tablet (Android) , she barely touches the computer.
(Score: 4, Funny) by Alfred on Friday August 08 2014, @05:19PM
The dept alone reminded me of a great (non-xkcd) comic.
This one really pertains to the department title.
http://www.giantitp.com/comics/oots0135.html [giantitp.com]
It uses stick figure-ish art so it is called Order of the Stick. Lots of D&D and RPG jokes.
(Score: 0) by Anonymous Coward on Friday August 08 2014, @08:57PM
So when does it start?
(Score: 2) by aristarchus on Saturday August 09 2014, @05:43AM
Micro- soft Surface: Do not even want to go there. What does Bob Dole say?