Microsoft earnings reveal new Surface is no match for iPad
Despite overall increased earnings, Microsoft's latest financial report shows that Surface sales have dropped by 17% -- though the quarter ended before new models intended to compete with Apple's iPad were shipped to customers.
Microsoft Surface sales have declined
During Microsoft's legally mandated earnings call, its financial year Q1 2022 saw the company's revenue increase 22% compared to last year. Revenue was $45.3 billion, and the company singled out how its Microsoft Cloud alone service generated $20.7 billion.
However, during the call, chief financial officer Amy Hood also reported a drop in Surface sales -- which she predicts will continue.
"Surface revenue declined 17% and 19% in constant currency on a strong prior year comparable," said Hood during the call. "In Surface, we expect revenue to decline in the single digits as we continue to work through supply chain uncertainty particularly in our premium devices."
Microsoft's Q1 2022 ended September 30, 2021. Just prior to that, the company launched the Surface Laptop Studio, Surface Pro 8, and Surface Duo 2 in mid-September 2021, but units were not shipped until early October.
Consequently, demand for the previous models would be expected to dip between the announcement and shipping of the newer versions, but Microsoft's Amy Hood did not attribute the drop to that. Instead, she said that the decrease was because the figures come after strong results the previous year.
For the next quarter, at least, Microsoft also expects the Surface to be affected by component shortages.
The Xbox has also seen shortages, but Hood says that Microsoft shipped "more Xbox Series X and S consoles than expected," and that, "demand continues to exceed supply."
The quarter also saw the release of the latest version of Windows, and CEO Satya Nadella says the company is "delighted" with the response.
"Earlier this month, we launched Windows 11, the biggest update to our operating system in a decade," he said on the call. "When I step back and reflect on the future of how we work, connect, and play, one thing is clear: the PC will be more critical than ever."
"There has been a structural shift in PC demand emerging from this pandemic," he continued. "And we are delighted with the early response to Windows 11. With every new generation of Windows, we also unlock the next generation of hardware innovation across our ecosystem."
Read on AppleInsider
Microsoft Surface sales have declined
During Microsoft's legally mandated earnings call, its financial year Q1 2022 saw the company's revenue increase 22% compared to last year. Revenue was $45.3 billion, and the company singled out how its Microsoft Cloud alone service generated $20.7 billion.
However, during the call, chief financial officer Amy Hood also reported a drop in Surface sales -- which she predicts will continue.
"Surface revenue declined 17% and 19% in constant currency on a strong prior year comparable," said Hood during the call. "In Surface, we expect revenue to decline in the single digits as we continue to work through supply chain uncertainty particularly in our premium devices."
Microsoft's Q1 2022 ended September 30, 2021. Just prior to that, the company launched the Surface Laptop Studio, Surface Pro 8, and Surface Duo 2 in mid-September 2021, but units were not shipped until early October.
Consequently, demand for the previous models would be expected to dip between the announcement and shipping of the newer versions, but Microsoft's Amy Hood did not attribute the drop to that. Instead, she said that the decrease was because the figures come after strong results the previous year.
For the next quarter, at least, Microsoft also expects the Surface to be affected by component shortages.
The Xbox has also seen shortages, but Hood says that Microsoft shipped "more Xbox Series X and S consoles than expected," and that, "demand continues to exceed supply."
The quarter also saw the release of the latest version of Windows, and CEO Satya Nadella says the company is "delighted" with the response.
"Earlier this month, we launched Windows 11, the biggest update to our operating system in a decade," he said on the call. "When I step back and reflect on the future of how we work, connect, and play, one thing is clear: the PC will be more critical than ever."
"There has been a structural shift in PC demand emerging from this pandemic," he continued. "And we are delighted with the early response to Windows 11. With every new generation of Windows, we also unlock the next generation of hardware innovation across our ecosystem."
Read on AppleInsider
Comments
Really odd phrasing. Contextually, "legally mandated" implies they're only making the earnings call because they are required to do so by law. It's a simple earnings call. Publicly traded companies do them all the time. During Microsoft's earnings call is how that should be written, imo. Afaik, earnings call aren't even legally mandated.
On topic: Surface devices have never been competition for iPads or Macs. Never will be either. Sales Numbers of Surface (hmmmm... could be a cool band name
To be clear: Microsoft has restrictions on how they price their Surface computers depending on which version of their own OS they use. For instance, if they use Windows 10 Home on a Surface laptop, it must be cheaper than a Surface laptop running Windows 10 Professional. Microsoft also puts exaggerated prices on their Surface line of PCs to not upset the big players in the PC market such as Dell, HP, Lenovo, et al. Sales of the Surface computers is a nice income for Microsoft, but it's not meant to compete fiercely with others.
As far as I know, Google looked at the Nexus Android phones and tablets as reference products as well, but the Google Pixel seems to be made to intentionally compete with others such as Samsung and BBK.
Maybe the Fall quarter outlook speaks to MS not having Tim Cook levels of supply chain management, but who does?
Reference computers don't go on sale. They are the concept cars of the computer world. MS can go design and engineer a concept laptop, show it around trade shows and to their OEMs, who can go build it themselves, to the specification of the reference computer, or something similar. By putting it up for sale, it is in direct competition with their OEMs. You do not see the ad dollars that MS has spent on Surface and see it as anything other than trying to sell as many Surface devices as possible.
Then, if I was a large Windows OEM, I would view MS's premium price strategy as a direct assault on the most profitable end of the sales spectrum. It is taking $4b to $6b per year, in the premium end of the market, out of Windows OEMs' pockets and putting them into Microsoft's pocket. That sounds quite upsetting. They may not sell a lot of units, but they are selling a lot of units in the most profitable part of the market. This product strategy has basically been the Apple playbook for the past 24 years: try to take the premium end of the market.
And the reason of "MS showing OEMs how to build tablet computers" is even stranger. Tablets and 2-in-1 computers have been running Windows tablet operating systems for 20 years now. The first release was in 2002! OEMs have been building Windows Tablet PC computers of all shapes and sizes since then. If anything, the Surface project at MS was started as a response to iPad sales. From 2010 to 2012, iPads sold very very well. Everyone was thinking that the post-PC world was coming and Apple got the form factor right with a slate. MS did the right thing and responded with the Surface devices to make sure they have an entrant in the post-PC world. The post-PC world as a market transition fizzled out. Even so, MS did even better by continuing to iterate. They have been successful enough to continue. Good for Microsoft.
What's disappointing is we are basically where we were in the aughts with Windows Tablet PC Edition computers. They are basically just laptops with a touch display and stylus input. People are using Surface devices, 2-in-1's the same way. The only big difference is the components got small enough to fit behind the display versus under the keyboard, but they are primarily still used as laptops 95% of the time. And, Apple's strange reluctance to implement high level computer features for their iPads has retarded its use in the PC market. It really hasn't done touch computing many favors either. There's really just too much drag from software.
Unless you just absolutely need a Windows PC you are far better off with an iPad Air or iPad Pro if you want a tablet device. iPad OS is simply more stable and the devices more powerful. They also have better resale value when you are done.
Parallels Access will allow you to run Windows app remotely on your iPad as if they were native apps on iPad OS.
With Office and many other suites of SW having migrated to cloud computing the reasons to buy any Windows PC continue to diminish.