Microsoft's Bumbled Surface Strategy Generated Just $853 Million in Revenue

Paul Lilly

Surface is officially a flop

Maybe Microsoft should have listened to its hardware partners when they pissed and moaned about the Redmond outfit deciding to build its own hardware. Acer was especially outspoken, warning Microsoft on several occasions that competing in the hardware space is a whole different ballgame than software, but those warnings fell on deaf ears and now Microsoft is paying the price.

We already know that Microsoft took a $900 million charge on unsold Surface RT inventory, but what wasn't revealed until now is how much revenue its Surface tablets generated. According to a recent 10-K filing with the U.S. Securities and Exchange Commission (SEC), Microsoft's entire Surface revenue was just $853 million, or $47 million less than the charge it took on Surface RT.

At $500 a pop, that equates to around 1.7 million Surface tablets sold through the end of June. Microsoft can't be happy with that figure, especially after noting that its sales and marketing expenses increased $1 billion year-over-year, or 34 percent, reflecting an $898 million increase in advertising costs associated primarily with Windows 8 and Surface - ouch.

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