[BLOG] Microsoft breaks the Surface to profitability

[CrimsonShade]

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After writing off unsold stocks of previous models and causing numerous jokes about whether profit would ever surface for Surface, Microsoft's most recent earnings report seem to suggest the company's fortunes are finally turning around. Microsoft claim that its Devices and Consumer group's revenue grew 8 percent year over year in the last calendar quarter of 2014, thanks in no small part to healthy Surface and Xbox sales. Though Microsoft refuse to reveal exact shipment numbers, revenues from Surface Tablets are said to have increased by 24% from Fiscal Quarter 2 in 2014 compared to this year - which Microsoft credits, as you may expect, mainly on the popularity of the Surface Pro 3.



And as for the XBox? Though the figures are less rosy, they remain still quite healthy. Microsoft state 6.6 million Xbox systems were sold during the rush to Christmas 2014. In the same quarter last year, Microsoft shifted 7.4 million consoles, so this represents a small decline. While last year's figures were broken down into 3.9 million XBox Ones and 3.5 million XBox 360s, Microsoft refused to offer any such breakdown this year; so it is hard to determine if the decrease is due to reducing sales of the older or the newer consoles - however, all indications suggest the new system represented a significantly larger chunk of sales compared to last year, in part due to the new console's game selection improving over the last year; as well as aggressive price cuts by Microsoft. Sony was quick to say that it sold 4.1 million PlayStation 4s just during the last month of holiday shopping, so it's apparent that there was at least a fierce fight between current-generation platforms.



It's otherwise a mixed quarter for Microsoft, whose total income this quarter shows a rare loss for the company - an operating loss of $243 million. Microsoft's move to offer Windows licences for free to smaller devices as long as they promote Bing as standard - and a generally slow-moving PC market which hasn't warmed to Windows 8 OR 8.1 - has cut revenue from Windows licences by 13%; however the promotion seems to have worked as revenues from the company's online services have mostly mitigated this loss. The main cause of the losses seems to be more down to the costs of both its massive restructuring plan and integrating Nokia's former mobile team. Speaking of which, Microsoft also appears to have turned around declines under Nokia's tenure, selling 10.5 million Lumia phones in the last year. All of this points to a company for which a PC Operating System - while still important - may not be as make-or-break as it once was.