Microsoft's Surface Revenue Revealed, Losses Dwarfed Sinking Sales

Ever since Microsoft's Surface debuted to tepid reviews and weak sales figures, analysts and pundits have wondered just how well -- or poorly -- the tablet was selling in the market place. From the beginning, Surface was a tough sell -- Microsoft did next to nothing to explain how it differed from a conventional x86-based PC. Returns were reportedly quite high from irate buyers who took the tablet home and discovered, to their chagrin, that while it had a desktop, said desktop was useless for launching software.

So what's the final figure? $853 million. That works out to about $1.7 million tablets shipped in the past year. Other people have leapt to compare this to Apple, which seems a bit unfair, given the latter's dominance -- so how does Microsoft do compared to everybody else in general? Figures from Q1 2013 show part of the answer:

Ow. The 900,000 figure from Q1 includes both Surface Pro and the Surface RT tablets. It's been assumed that Microsoft's writedown was mostly on Surface RT hardware, but the company has never specifically said how it broke down those figures. If we assume that the majority of Surface's built were the cheaper 32GB models, these figures suggest that Microsoft built ~3 million devices, though that's still a very rough estimate.

The problem, of course, is that Microsoft's shipments weren't great even compared to small vendors and now we know much of that inventory is sitting in a warehouse somewhere.

Is Surface RT Dead?

Reports like this illustrate how badly Microsoft's first year of hardware sales has gone, and inevitably raise the question of whether or not Surface RT is about to be canceled. Personally, I think it isn't. In the past, Microsoft has proven willing to iterate on products for several years running. Sometimes, as with Xbox, the company creates a runaway success. Sometimes, as with Zune or Windows Phone, it limps along with a tiny fraction of the market.

The thing about Surface RT, however, is that it represents the greatest challenge to the conventional x86 market for PCs that we've ever seen. Companies like Samsung, Qualcomm, and Nvidia have reason to want and see it succeed rather than sputtering out after a single product generation. Surface RT and Surface Pro may not have ignited the market, partly due to Microsoft's insane decision to price the hardware at twice what it should have sold for, but many of the ideas around Surface -- vapor deposition, the high-quality display, and the kickstand -- were really good ideas.

Surface is still a product and a brand that people could get excited about, once Microsoft fixes it. Hopefully the company won't kill it prematurely, in either its ARM or x86 configurations.