Since the release of Microsoft, Corp.’s (NASDAQ: MSFT) first Surface tablets in late 2012, the devices have mainly been considered failures when it comes to the dollars and cents aspect of consumer electronics. Neither the Surface nor the Surface Pro sold well since their respective release dates, and it didn’t help either that Microsoft had to deal with some PR complications, such as the Surface RT proving to be confusing for users who weren’t aware that Windows RT is a “lite” version of the Windows platform that is specifically created for devices based on ARM architecture. Also, many felt that the productivity-oriented Surface Pro didn’t come with enough storage space for end users, what with the software taking up a huge chunk of the advertised internal memory. However, Microsoft had recently reported some solid growth figures in Surface tablet sales, something that may bode well for the future of the “struggling” slates.
Statistics on Microsoft’s quarter four 2013 financials show that Surface revenue had increased by more than twofold, rising from $400 million to $893 million on a quarter-over-quarter basis. Microsoft said in its conference call with investors that this was driven by “improved execution at retail and favorable reviews of the new Surface devices,” namely the Surface 2 and Surface Pro 2. Further, tablet shipments had also more than doubled from quarter three 2013 to quarter four 2014, though it should be mentioned that shipments to retailers are not to be confused with sales, or the actual Microsoft Surface tablets purchased by customers. Microsoft did not delineate sales figures to separate sales of the Surface/Surface 2 line (tablets powered by Windows RT, which cannot run “legacy” programs), and the Surface Pro/Surface Pro 2 (tablets running on full-featured versions of Windows 8/8.1).
Regardless of how one looks at the Microsoft Surface tablets’ success, or lack thereof, December 2013’s statistics are a more than decent improvement over early-2013 stats, where Microsoft had written off $900 million due to poor demand and sales for the first-generation Microsoft Surface RT. As of quarter two 2013 (June ending quarter), Microsoft had earned $853 million in Surface tablet sales, even though these tablets had not yet been available for at least 12 months/one calendar year.
Despite the improvement in sales and shipments, Microsoft still has a ways to go before it turns a corner and makes the Surface tablet series into a truly profitable family of devices. And it did not disclose any financial specifics either on the performance of the Nokia Devices and Services unit, an arm it is set to fully acquire in the current March 2014 quarter. According to Microsoft CFO Amy E. Hood, the company, in her opinion, has “made a big leap from version one to version two.” She also added that there was growth in Microsoft’s Windows Phone business, both in licensing and mobile phone intellectual property revenue. As for Microsoft Chief Executive Steven A. (Steve) Ballmer, he admitted that Microsoft’s Commercial arm “continues to outpace the overall market”, and that the Devices and Consumer segment performed “great” in the holiday, or October to December 2013 quarter.