Microsoft has struggled over the years to develop its own hardware. The Xbox has been the only notable success, and even that product has had its share of struggles. One has to wonder, how long can Microsoft endure without getting its mobile hardware right? A strategic retreat seems in order.
First, the bad news about the Microsoft Surface tablet just keeps rolling in. First, in this report by Gregg Keizer at Computerworld, Microsoft reported US$409 million in Surface revenue. That's probably about 500,000 units. (Compare that to Apple's 13.3 million very profitable iPads in the same quarter.)
Worse, however, is that Microsoft may well have lost money overall thanks to the cost of bringing in that revenue. Mr. Keizer continues....
But unlike the past two quarters, Microsoft has not revealed the cost of revenue associated with the Surface for the June period, at least in the 8-K document filed with the U.S. Securities and Exchange Commission yesterday.
Even so, Microsoft did admit to losses in the prepared remarks read by chief financial officer Amy Hood during the call with Wall Street analysts yesterday, as well as in the 8-K.
In essence when your manufacturing and operations for a product can't generate profitability and when customers aren't buying the product in any serious numbers, it's usually time to kill the product and build a new hardware vision. How long it will take CEO Nadella to force that decision will be interesting to watch. Maybe he's just buying time (and losing money) while Microsoft rethinks its tablet strategy.
Microsoft is in a similar pickle with Windows Phone. For a different but similar set of reasons, Robert "Google Glass" Scoble, a former Microsoft employee, has urged his former company to ditch Windows Phone. Later, Matt Rosoff, the editor-in-chief of CITEworld chimed in with some elaboration that's worth a look. "But really -- what IS the point of Windows Phone?" They both make good points.
What's becoming clear is that Microsoft's historical tendency to load agenda into its products instead of building hardware products people just love continues to haunt its mobile hardware business.
On the other hand, over the years, Microsoft has developed significant strength in its software: the knack for helping customers build their business and their wealth. That's where I think the future of Microsoft is, and so I explained at The Street: "Microsoft's Similarities to Apple Will Be Its Salvation."
Next: the tech news debris for the week of July 28.: dubious PC sales reports, the most popular programming languages, iOS developer woes, and teaching kids to understand what they see on the Internet.