Microsoft losing money on Surface tablets

Sales have been eclipsed by advertising costs and accounting charge, annual report shows

Microsoft cut the price of its Surface RT tablet earlier in July, leaving it with a $900 million charge on its unsold stock.

Microsoft cut the price of its Surface RT tablet earlier in July, leaving it with a $900 million charge on its unsold stock.

 

Microsoft’s Surface tablets have yet to make any profit as sputtering sales have been eclipsed by advertising costs and an accounting charge, according to the software company’s annual report.

The two tablet models, introduced in October and February to challenge Apple’s popular iPad, have so far brought in revenue of $853 million, Microsoft revealed for the first time in its annual report filed with regulators yesterday.

That is less than the $900 million charge Microsoft announced earlier this month to write down the value of unsold Surface RT - the first model - still on its hands.

On top of that, Microsoft said its sales and marketing expenses increased $1.4 billion, or 10 per cent, because of the huge advertising campaigns for Windows 8 and Surface. It also identified Surface as one of the reasons its overall production costs rose.

The Surface is Microsoft’s first foray into making its own computers after years of focusing on software, but its first attempts have not won over consumers. By comparison, Apple sold almost $24 billion worth of iPads over the last three quarters.

Reuters

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