Half a year ago Microsoft took a $900 million charge due to unsold inventory of its Surface tablets. Apparently the company figured out how to turn its tablet business around later in the year, because Microsoft’s latest earnings report shows $893 million in revenue from Surface tablets in the fiscal quarter ending December 31st, 2013.
That’s more than twice the $400 million revenue the Surface division brought in during the previous quarter.
While the new figures look pretty positive, Microsoft actually spend $932 million in order to make $893 million… in other words, Surface is still losing Microsoft money. But it’s losing the company less money.
Microsoft’s Surface tablets are the company’s first foray into the personal computer space — putting the software maker in direct competition with some of the PC makers it hopes will continue to install its software on computers they sell to consumers.
But I can see why Microsoft thought it was worth taking a risk by delivering its own hardware. Surface tablets run the Windows 8 and Windows RT operating systems and feature a user interface that’s dramatically different from Windows 7 and earlier. While there’s still a desktop mode for keyboard and mouse input, Surface tablets blur the lines between notebooks and laptops by offering a touch-friendly, full-screen user interface for apps, an integrated app store, gesture-based navigation, and optional keyboards for when you need them.
While many PC makers have launched Windows tablet/notebook hybrids in the past year or two, the Surface line of products is sort of like Google’s Nexus line of phones and tablets: It shows what Microsoft considers to be the Platonic ideal of a Windows tablet.
Theoretically that means even if the company continues to lose a bit of money on Surface tablets, there could be a good reason to keep making them: it’ll help keep competitors on their toes and producing high quality, affordable Windows tablets. On the other hand, if Microsoft had lost too much money on the Surface project, I wouldn’t have been surprised to see it go the way of the Zune media player and Kin smartphone while Microsoft instead shifted its focus from Windows hardware back to software and services.
Now that the company’s a bit closer to making its Surface products profitable, don’t expect to see them go away anytime soon though.