The Surface 2 is a hit as Microsoft posts record $24.52 billion quarter

Daniel Bader

January 23, 2014 6:04pm

Microsoft posted a better-than-expected results for its fiscal Q2 today, earning a net income of $6.56 billion on revenue of $24.52 billion (all numbers USD).

The company showed growth in a number of areas, but it was the Surface division that surprised the most: after writing off nearly $1 billion in Surface RT inventory, the same division earned $893 million in revenue this quarter, more than double that of the previous quarter. While the Surface product line is not yet profitable for Microsoft — cost of revenue for the Surface was a slightly-higher $932 million — it bodes well for the future of the tablet/laptop hybrids.

Both the Surface 2 and Surface 2 Pro launched at the beginning of Q2 and fixed many of the issues of its predecessors. Specifically, the performance issues that plagued the Tegra 3-based Surface RT were eliminated with the Tegra 4-running Surface 2, and the stand was extended on both to ensure more comfortable lap placement. Microsoft is still dealing with a dearth of great Windows 8 apps, but the Windows Store is slowly being populated by popular brands like Facebook, Twitter and Flipboard.

Now that the deal to purchase Nokia’s Devices & Services division is almost complete, the balance sheet may look a little different three months from now, but Microsoft is in a good position, both cash- and resource-wise, to lead the Lumia division to success.

SourceMicrosoft

  • tomas

    Doesn’t surprise me. The surface is the best tablet for doing any sort of productivity on. I wanted a tablet for couch surfing and school. It was a toss up between a surface 2 and galaxy note pro. Surface was definitely the better choice at being $100 less and running word and excel properly.

    • Tom

      At first I thought you were comparing the Pro (a real PC) to an ARM tablet, then I saw that you said “$100 less” so I realized you were referring to the Pro. I guess Win RT’s advantage is a proper Office suite. But I find that I need a keyboard and mouse when working in Office anyway, so IMO a better deal is to just use the laptop I already have for working, and use a Nexus 7 or Nexus 10 for entertainment lol

    • hi

      Lol

    • bigshynepo

      The only reason MS is posting these kind of surface numbers is because of the ridiculous sale prices they were selling for during the holidays. Nothing about MS’s original plan for surface worked out and they had to slash prices to move units…
      Lets see if the market embraces the surface pro 2 or the later iterations because IT IS a good product but just too pricey, in my opinion.

    • Tom

      The surface pro is competitively priced if you compare it to tablet PCs, not to other ARM tablets (that is what RT is for). Tablet PCs with digitizer pens like a certain Lenovo Thinkpad tend to have higher starting prices than the surface pro does.

    • bigshynepo

      But in regards to the Surface Pro 2, the current model, it starts at $899 and goes to $1799(!). For an i5 with 4GBram/64GBhdd, it isn’t going to set the market on fire at $899. I just think that Microsoft has the money in the bank to sell the surface for cheaper. I like Windows Phone and the Surface but compared to the Xbox division, it’s like MS forgot to market the Surface (except the infamous click launch trailer). Even in the big box stores, Samsung is beating them at their own game by installing larger Store-within-a-store locations than Microsoft. Here’s hoping for a bright 2014…

      (P.S. Windows 8.1…. you suck!)

  • wes

    Bought myself a surface pro 128 on sale for 675. Dad bought one too for 540, gave him my student pricing (best deal ever, 20$ more expensive than an iPad air). 2 other friends bought as well.

    If the pro 2 were slightly cheaper ppl would actually buy this new form factor (ultrabook in tablet form).

    I run mine as my desktop, ultrabook and tablet. Not bad for 675$.

    • Walter

      I just left the Microsoft store and I was really impressed with the Surface and Nokia 1020. They are truely amazing products. There only draw back is the sticker shock they cause.

  • Tom

    I wonder how many of the Surfaces that sold were the Pro models, which are actual PCs? Windows RT has flopped worse than BlackBerry 10. MS needs to do these to make RT a viable competitor:

    1. Merge the Windows Phone 8 app store with RT’s so that any app written for WP8 is automatically available on RT. Did anyone not learn from the Playbook?
    2. Include the digitizer pen with the Surface RT (and encourage third-party RT vendors to do something similar). Without the pen, Windows RT has little to distinguish itself from Android/iOS. It can’t actually function as a PC despite how much it resembles x86 Windows, and it has very few apps.

    I have a few friends who bought the Surface and all went for the Pro. None of them use the Metro mode btw, though they use the pen a lot with OneNote.

  • hyperhyper

    I’ll be buying the Pro 2 (or maybe the Pro 3) within the next 6-10 months. I keep playing with it when I hit up FS or BB and I’m always impressed by it. Full fledged operating system + great build quality = win for me.

  • It’s Me

    So, a product with negligible market presence and that continues to lose tens of millions of dollars is a “hit”? By what measure can it be called anything close to a hit? The surface 2 is a great improvement over the first gen but let’s be real.

    Yet another “article” that seems to be more of a paid PR piece instead of an article.

    • Mawhayden

      Hmmm, I guess it’s another PR piece that Samsung sales are lower than expected . Actually , I was surprised on both pieces, Microsoft had better than expected profits and Samsung had lower than expected profits…Go figure but just because we are freezing in the North doesn’t say that global warming doesn’t exist….all in time watch the canary in the coal mine ……..

    • It’s Me

      I was surprised to see that article, but perhaps recent discussions and explicit suggestions that it be covered led to it being posted. The fact that Samsung’s sales have been softer than expected (internally and by analysts) has been news for at least 3 months, yet this is the first time I’ve seen anything about it here.

  • SHAZ

    Liars…..Liars…Liars……Windows 8 ruined everything…. They are just paying and getting it post to fool that Microsoft is doing great in PC department…

  • Pigs Can Fly

    How did Microsoft sell so many Surface 2’s when they weren’t flying off the shelves?

    • Nfnc1234

      Because they got no wings like you do? Kidding..