Just how much has Surface cost Microsoft?
The initial launch of Microsoft’s Surface tablets wasn’t without its upsets: one year in, we were looking at close to a billion dollars in losses for Microsoft due to unsold Surface RT inventory. But since then we’ve seen the arrival of the Surface 2 family, not to mention the Surface Pro 3 earlier this year – are they faring any better? Well, we’ve heard good things about Pro 3 sales, and solid Surface revenue, but revenue’s just part of the equation – we have to factor in expenses before we have a real sense of profit (or lack thereof). And based on some analyst estimates, when we consider the full cost of Microsoft’s Surface efforts, the company may already be out some $1.7 billion.
Problem is, while Microsoft reported $409 million in Surface revenue last quarter, developing and selling those tablets appears to be costing the company a lot more than that; estimates vary, but place the cost of revenue (the expenses) just for that quarter somewhere in the $730 to $775 million range. Any way you slice that, we’re looking at hundreds of millions in losses. Going back a full year, the losses add up to around $676 million, and over the entire life of the Surface family, we’re up to that $1.7 billion figure.
Microsoft is used to eating the losses of a new project early on, expecting that eventually its investment will turn around and start paying off, and despite bumps like that Surface Mini launch that never happened (or at least, not yet), the company seems broadly committed to Surface going forward. What remains to be seen now is just how long it might take before Surface turns into a money-maker.