Microsoft's Surface Revenue Drops by $285M

[Megalith]

Revenue for Microsoft’s Surface hardware has done a deep dive: the latest earnings call has revealed that only $831M was produced this period, compared to last year’s 1.1B. The company blames the lack of new Surface models to drive interest, and how there are a lot of cheaper clones out on the market for people to choose from nowadays. I hope this doesn’t mean they will make future devices less of a premium product.

"There is competition that is lower-priced," said Carolina Milanesi of Creative Strategies in a Friday interview. "There's not just more of the same, but a lot that are positioned in the same space are cheaper. And there were expectations that we would have seen a [product] refresh that we haven't seen yet." Jack Gold, principal analyst at J. Gold Associates, echoed Milanesi on the age angle. The revenue decline "indicates that the aging product needs a refresh badly," Gold wrote in a note to clients today. "Price cutting and competing vendors' products will continue to create declines until new product is released, rumored for later this year."

 

[heatlesssun]

Not surprising, this product cycle is 18 months old now with just a minor upgrade in the line to the Surface Book with Performance base and the new Surface Studio which is certainly an ultra niche product.

But the Surface line has done what Microsoft was looking to do with it, spur OEMs to emulate slick 2 in 1 and hybrid designs. I think the impact of that is more important than direct Surface sales unless Microsoft really wants to compete with its OEMs with a wider and more affordable line of products which I don't think Microsoft is interested in at this time. But I'm definitely looking forward to the Surface Book 2.

 

[PeaKr]

..of course the numbers here have nothing to do with the 'FAKE' economic recovery (probably the real reason M$ didn't refresh) or that a 5 year old laptop will do all the work 98% of the people need it to do.

 

[gunbust3r]

Abusing everyone with that worst in class Avastar WiFi/Bluetooth chipset for 11 generations of product will do that. Especially in the devices with no Ethernet...

 

[steakman1971]

My employer has an upgrade cycle of 5 years. You better hope you get a decked out system that will last!
Reflecting, my current home rig is still using an i7 2600k processor. I replaced the video card a few years ago (Nvidia 970), added an SSD at some point. This system is still running just fine for what I use it for.
I get the upgrade bug every now and then but have talked myself down each time.
Another question - do people use the Surface more as a tablet or is it their laptop as well? The people I know using them are using them instead of laptops. One person even uses an iPad with it (no clue why? - the Surface does a lot more).

 

[Pusher of Buttons]

We went pretty balls deep in Surfaces before I started at my job. The crap reliability of the dock has essentially relegated them to near uselessness. I can't use them in any critical use terminals for fear the dock won't fire up when turned on or woken from sleep/hibernate. I use an SP4 as my daily driver but I'm used to the issues, don't want to deal with users being stuck with it.

 

[RogueTadhg]

1. The hardware is old.
2. People are anxious for the new surface pro 5.

The last Pro 4 was released October 2015.

I had my reservations about the Surface 4. I even owned both the Apple Pro and the Surface 4 at the same time to compare the two. The Apple Pencil really shines a spotlight on the Surface's quality of writing. If the Surface 5 has the writing quality of the Apple Pencil/Pro, it'll be a huge hit.

 

[EchtoGammut]

I think the lesson is Microsoft sucks at running a hardware company. They have great initial ideas and often beat everyone to the market. But doing the actual running a hardware company, they suck at. They suck at marketing. They suck at updating devices. They suck at firmware patches. They suck at peripherals. They suck at moving the device to newer technology or predicting the features people will want. When they fail, they say "we didn't intend for this to compete with the market, just to push our partners in new directions". No, they just suck at running a hardware company.

 

[heatlesssun]

I think the lesson is Microsoft sucks at running a hardware company. They have great initial ideas and often beat everyone to the market. But doing the actual running a hardware company, they suck at. They suck at marketing. They suck at updating devices. They suck at firmware patches. They suck at peripherals. They suck at moving the device to newer technology or predicting the features people will want. When they fail, they say "we didn't intend for this to compete with the market, just to push our partners in new directions". No, they just suck at running a hardware company.

That the Surface has failed or sucks is far from a consensus opinion. We're approaching the 5th Surface Pro since 2012, will this revision is long in the tooth, that's hardly sucking at updating devices. As for the other stuff, all I can say is that I've been pretty happy with my Surface 3, Surface Pro 3 and Surface Book in that area. The Surface Book was definitely rough at launch, the Skylake power states and the dual GPU switching and detachment weren't solid at release, took them about 5 months to get that right after launch.

At this stage of the game, it would behoove Microsoft to take a little more time and iron things out even if the launch might run a little no long than they'd like. A lot more people will complain about a product being rushed more than coming out later.

 

[Term-X]

I love my Surface but seriously... they need to "make more models to drive interest", like their Capt. Obvious said. Give me my 15" and 17" models so I don't go facking blind looking at the 13" model. Yes, I know about PPI and the ability to scale the general UI but it doesn't solve all issues.

 

[hmz]

1. The hardware is old.
2. People are anxious for the new surface pro 5.

The last Pro 4 was released October 2015.

I had my reservations about the Surface 4. I even owned both the Apple Pro and the Surface 4 at the same time to compare the two. The Apple Pencil really shines a spotlight on the Surface's quality of writing. If the Surface 5 has the writing quality of the Apple Pencil/Pro, it'll be a huge hit.

I wouldn't call the Skylake an outdated chip IMO.

 

[HoffY]

Give me my 15" and 17" models

A little bit of this... and price. They just priced themselves out of the stratosphere. I'd have upgraded to a SP4 and SP5 (i'm going to assume it'll have the same faults as the SP4, offer to little at FAR to great a price).

The product has got to a great position physical format wise. I've wanted a SP3 style device for over a decade and it took them till the SP3 to get at least to an acceptable hardware feature set before it warranted the price and only then because i was able to get a 10% off EDU pricing to lessen the blow. Since the SP4, the prices are ridiculously high in AUS. RIDICULOUSLY high when they were already over priced.

Theyr eally need more expansion ports as well not just a single USB. IF they don't have at least 2 USB-C ports it's just more apple style pissing their users off with lack of functionality and then asking said customers to spend a kidney for the "privilege".

 

[commissioneranthony]

It doesn't help that I still can't walk up to a microsoft store or bestbuy and purchase a surface studio. Almost a full year from release. I understand it's a niche product, but man they have some supply chain issues if they can't even stock a niche product in their own stores.

 

[Drawmonster]

Come out with the new Surface Pro or Surface Book and the profits will jump up again. I'm waiting for the new Surface Book right now.

 

[AceGoober]

$2,999 for the base model Surface Studio on mid-range hardware is just too much. I could easily build two, possibly three, computers for that much. Just doesn't make any Microsoft is charging that much for a mediocre system. Touch screen or not.

 

[Krab]

The premium pricing is going to limit the size of the market for them.

Most potential buyers either have one already or are waiting for the next version.

 

[krotch]

The premium pricing is going to limit the size of the market for them.

Most potential buyers either have one already or are waiting for the next version.

Yep. I have a Surface Pro 3 and Surface 3. I'm good for now.

 

[ManofGod]

I think the problem for me is, I am not one of those customers who replace a perfectly good functioning device every time something new is released. I have a SP3 that works just fine, although it is just a 64GB Model with a Core i3 M model. Even then I purchased it is a refurbished unit after trading one in with a broken screen at the Microsoft Store. I had more internet in purchasing the Band and Phones but, they killed those off.

 

[krotch]

I think the problem for me is, I am not one of those customers who replace a perfectly good functioning device every time something new is released. I have a SP3 that works just fine, although it is just a 64GB Model with a Core i3 M model. Even then I purchased it is a refurbished unit after trading one in with a broken screen at the Microsoft Store. I had more internet in purchasing the Band and Phones but, they killed those off.

Some of us are the same way. Some are not. I will replace a perfectly functional device, if my needs are no longer met by it. I originally got into the tablet like computers with an HP TM2T. It worked fine for my needs, but then the slate devices started coming out. I could keep lugging around the like 5 lbs brick or go with an Acer W700 tablet, which was not only faster, but was lighter. Then it started getting these weird bubbles in the screen and Acer, being the shit bag company they are, wouldn't do crap about it.

So...while the tablet still worked and the bubbles were in the upper most corners, I went with the Surface Pro 3. As of right now, the SP4 doesn't bring anything new to the table, nor is it really that big of an upgrade over the SP3. I expect the SP5 to be more of the same.

Even now, I want a Surface Book with performance base. It'd replace my SP3 and my Alienware laptop. It's expensive though and in tablet only mode, it's battery life is atrocious.

 

[gunbust3r]

$2,999 for the base model Surface Studio on mid-range hardware is just too much. I could easily build two, possibly three, computers for that much. Just doesn't make any Microsoft is charging that much for a mediocre system. Touch screen or not.

Not mediocre, WORST. The fact that on a $4,200.00 surface studio the only option for WiFi/Bluetooth is literally the poorest performing chip available is laughable. I have to give Marvell props though after four years they have managed to now include 4 options in the advanced tab of the driver. It might even be possible that one of those four actually work 100%

 

[raz-0]

I can only speak for myself.

I liked the surface book in general, but it had a handful of issues that needed fixing. Everything needed to fix it is here as well as better processor choices. Yet they didn't really update the damn thing. They wowed me enough to want their products, but they have a similar problem to apple. They currently have a product that asks me to spend a premium to get something on the verge of obsolescence, and if I wanted verge of obsolescence, my 2012 MBPr does just fine.

 

[heatlesssun]

I can only speak for myself.

I liked the surface book in general, but it had a handful of issues that needed fixing. Everything needed to fix it is here as well as better processor choices. Yet they didn't really update the damn thing. They wowed me enough to want their products, but they have a similar problem to apple. They currently have a product that asks me to spend a premium to get something on the verge of obsolescence, and if I wanted verge of obsolescence, my 2012 MBPr does just fine.

Well sure, that's the nature of product cycles. I bought my Surface Book original at launch in October 2015 and it's still running fine. Now if you were to buy one today at whatever they are going for now, probably not such a good idea because I would expect at most the line to get updated in next 4 to 5 months tops.

 

[jnemesh]

I think the lesson is Microsoft sucks at running a hardware company. They have great initial ideas and often beat everyone to the market. But doing the actual running a hardware company, they suck at. They suck at marketing. They suck at updating devices. They suck at firmware patches. They suck at peripherals. They suck at moving the device to newer technology or predicting the features people will want. When they fail, they say "we didn't intend for this to compete with the market, just to push our partners in new directions". No, they just suck at running a hardware company.

They also kind of suck at the software side too. I refuse to use a Windows system at home now, thanks to Windows 8 and 10! Couldn't be happier getting MS out of my life completely!

 

[hmz]

I think the PC market is down in general, and not the Surface line in particular.

The Surface products are still a great buy. They're usually on sale.

I've been using the SP4 since the release and its awesome. Some glitches, but most of them have been fixed. The biggest disappointment was the dock. The damn thing was overpriced to begin with and with flawed functionality.

 

[andrewaggb]

The studio is nice but it's seriously expensive. And at least on the one I tried I thought the pen lagged a lot more than I expected given it's price.

SP4 has been out for a while, I'm expecting a 5 soon. I think everybody is. And hoping that the 5 is flawless. I know lots of people with surface's and I feel like too many people have issues with the previous models. They mostly love them, so I guess it can't be too bad. Personally I want a real keyboard and a bigger screen. Even on a portable.

 

[krotch]

Well sure, that's the nature of product cycles. I bought my Surface Book original at launch in October 2015 and it's still running fine. Now if you were to buy one today at whatever they are going for now, probably not such a good idea because I would expect at most the line to get updated in next 4 to 5 months tops.

Buying one today is still a good idea, if you get a really good discount on it. Full MSRP, no thank you.

 

[Trimlock]

They really don't have much new hardware to upgrade one to. The 4 Pro is a seriously awesome device still, but they can't refresh for the sake of refreshing.

I guess they can but it probably wouldn't drive the sales that would justify engineering a new, marginally upgraded device. If anything people are holding off for a new device that isn't almost 2 years old. I know I am

I had the original Surface Book for a hot minute, great device but way too many problems. I wanted to love it but I couldn't keep it for the issues it had and the cost of the device. So now I wait for their new release, the iPad mini 2 will have to hold me over for a while longer.