Believe It: Microsoft Surface Is Turning Out to Be a Moneymaker

 By 
Todd Wasserman
 on 
Believe It: Microsoft Surface Is Turning Out to Be a Moneymaker
Credit: Timothy Clary

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The sales, which were reported in Microsoft's fiscal second quarter, compare to revenues of $400 million in the previous quarter. The figure almost makes up for the $900 million charge the company took on Surface RT in its fiscal fourth quarter, which ended June 30, 2013. That charge came as Microsoft was sitting on an estimated 6 million unsold Surface RT tablets.

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Since then, the company cut the price on the Surface RT, expanded distribution and introduced the Surface 2 and the Surface Pro 2, which improved on many of the initial tablet's flaws. During the holiday season, some retailers, including Walmart and Best Buy, reported the Surface 2 was out of stock. However, after the holidays ended, the Surface accounted for just 2.3% of all tablet-based Internet traffic, according to Chitika. That compares to 76.1% for Apple's iPad.

Despite the small market share, an iFixit teardown of the first-generation of Surfaces revealed that the devices offered a healthy profit margin -- $229 on a $499 Surface. That figure doesn't include marketing the Surface. While the company hasn't disclosed a marketing budget for the Surface, Microsoft's overall ad budget was estimated at $2.5 billion in 2013.

One caveat: The comparison with the previous quarter is a bit misleading since sales of such devices typically rise dramatically in the holiday-laden fourth quarter. But the stats are encouraging for Microsoft nonetheless.

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