Microsoft losing millions on Surface

Software giant Microsoft is losing a fortune on its Surface line of tablets.

Computerworld  has been looking into Vole’s filings with the US Securities and Exchange Commission and found that Microsoft reported $494 million in revenue from the Surface line in the latest quarter.

That sounds good but the actual cost of revenue was $539 million, which means that it lost $45 million in the quarter from Surface. It should be doing better after being in the market for a while, but the loses are $6 million more than the previous quarter.

In the last nine months, Microsoft spent $2.1 billion on the Surface, and gained $1.8 billion in revenue, meaning a total loss of $300 million. The biggest loss came in the September 2013 quarter, some $216 million.

It is not clear how Microsoft is able to lose so much on the Surface. We would understand if it was cheap, but the fact it is so pricey that it makes the iPad look cheap.

The Surface 2 Pro starts at $899, and the RT-based Surface 2 at $499. The cheapest iPad Air sells for $499.

Vole might say that the Surface will bring in additional revenue because it uses Microsoft services such as Bing, Bing Maps, OneDrive, and email. Yep they are not great money spinners either.

The question then is what is Microsoft going to do? It needs the Surface for its mobile strategy, our guess is that it will have to work out a way to make them for less.  It might take a leaf out of Google’s book.