Recent SEC Filing Reveals That Microsoft Is Still Losing Money On Every Surface Device Sold

Microsoft reported its latest financial quarter results last week and it was better than what many analysts expected. As Microsoft is transforming into a Devices and Services unit, the results of the newly formed Devices unit is an important one. As per the recent SEC filing by Microsoft, Microsoft is still losing money on every Surface device sold. The sales of the tablet has not hit the volume to make it profitable. For the quarter ended on March 31st, Microsoft lost about $45 million in Surface sales and about $300 million for the nine months ended March 31, 2014.

Three months ended March 31, 2014 compared with three months ended March 31, 2013:

Surface revenue was $494 million for the three months ended March 31, 2014. Surface revenue increased due to a higher number of units sold. Surface cost of revenue was $539 million for the three months ended March 31, 2014, which increased due mainly to a higher number of units sold.

Nine months ended March 31, 2014 compared with nine months ended March 31, 2013:

Surface revenue was $1.8 billion for the nine months ended March 31, 2014. Surface revenue increased due to a higher number of units sold. Surface cost of revenue was $2.1 billion for the nine months ended March 31, 2014, which increased due mainly to a higher number of units sold.

Even though Microsoft has not shared any numbers related to the no.of Surface units sold, we can come up with an approximate number by using the revenue posted by Microsoft. If you consider each Surface unit to bring in $350 of revenue, Microsoft should have sold about 1.4 million units(even less if more Surface Pro units were sold) of Surface devices in the last quarter. With the upcoming release of Surface Mini, I guess Microsoft Surface unit can turn profitable within next 18 months. What do you think?

Source: SEC