Microsoft's Surface division passes the billion dollar revenue mark in Q4 2014 and achieves its purpose

surface pro 3 ad 1Microsoft has announced its earnings for its second fiscal quarter of 2015 ending on December 31 just recently, and one particular area has sparked our interest as it has now officially become one of the many billion dollar businesses Microsoft has.  This business that we’re talking about pertains to the Surface line of devices as it has generated $1.1 billion in revenue for the quarter largely driven by strong demand of Surface Pro 3 and its accessories.

This $1.1 billion the Surface line generated is up 24% compared to the previous quarter where revenue was just north of $900 million, and although the software giant didn’t disclose sales numbers, the fact that sales are increasing is an important achievement for the company.

The Surface has achieved it’s goal

Microsoft’s decision to get into the hardware space with Surface devices was a bold move for the company, and was done largely due to the fact that PC OEMs were creating lackluster hardware and Microsoft was not able to convince them to change and make devices that pushed the boundaries in hardware design. Microsoft’s shareholders were not supportive of this decision early on, especially as Microsoft took a $900 million write-down early on in the life cycle of the original Surface RT.

Microsoft’s goal with the Surface line was to create an aspirational device giving OEMs a reference point in hardware design and offer a clean Windows user experience.  This decision was met with a lot of backlash from some OEMs which have since started and continually support the Chromebook.

However, when we fast forward to today and look at the devices available in the market and ones that will make their way soon, shows us that Microsoft did in fact inspire OEMs to create bold designs and push into the frontier of hybrid PCs. There are now plenty of form factors to choose from, with new thin and light Ultrabook form factors, PCs that have rotating screens, screens that detach, and even ones that bend all the way back.

OEMs have embraced the change, and Surface is leading the way, and the fact that it’s generating more revenue for Microsoft and proving to be a successful viable business model is a sign of good things to come, especially as Windows 10 is set to arrive.

Source: Microsoft

Microsoft shows off some of the high praises Surface Pro 3 received in their new TV ad

stuff-gadget-awards-2014-best-gadget-microsoft-Surface_pro-3-finalMicrosoft has hit a home run with the Surface Pro 3 with its design and functionality.  The Surface Pro line, and especially the newest Pro 3 model is literally responsible for creating a new category of hybrid devices which are both tablets and PCs.

Just last month, Time Magazine named Surface Pro 3 as one of “The 25 Best Inventions of 2014″, and it made Stuff Magazine’s “Gadget of the Year” just a few weeks ago, along with many others.  You can also check out our review of this device here.

Microsoft is certainly proud of their achievement and isn’t afraid to show off some of these accolades in their new Surface Pro 3 ad.

Source: Surface YouTube

Previous achievements help Surface Pro 3 gather strong momentum this holiday season

surface pro 3 ad 1Microsoft’s Surface Pro 3 launched with a bang, its new super slim design, larger and sharper display along with a new and improved kickstand addressed virtually every design flaw that plagued the previous models.  Even the new keyboard and track pad were a significant upgrade, but how did this translate into sales numbers?

Early on after its initial launch in only the US, Canada and Japan, Microsoft announced that Coca Cola, BMW, Louis Vuitton Moet Hennessy and many other large enterprise have committed to adopting their new hybrid machine in large quantities.  In September, Microsoft has expanded the Surface Pro 3 availability to an additional 27 markets, and since then there have been many more stories about businesses continuing their Surface purchasing trend.

Large airline companies such as Lufthansa, Austrian Airlines have adopted the Surface Pro 3 as well, while Delta Airlines are using Surface 2 models.  In addition, the  NFL is already using the Surface Pro line of devices and many of them are Surface Pro 3 models, along with the Real Madrid Soccer team deal to use the Surface Pro 3 and recent NASCAR deal, it seems that Microsoft has hit a home run with businesses and their newest tablet.

Just last month, Time Magazine named Surface Pro 3 as one of “The 25 Best Inventions of 2014″, and made Stuff Magazine’s “Gadget of the Year” just a few weeks ago.  It seems that the positive momentum just keeps continuing which is something pleasantly surprising given how the previous models have performed in the market.

Microsoft also seems to be doing away pretty well in the advertising department continually targeting the MacBook Air and even the standalone Surface ads are effective.  It seems that the quote “3rd time’s the charm” has really played out well for the software giant with the Surface Pro line.

But how is Surface Pro 3 performing with consumers?  We don’t have any official numbers from Microsoft, but according to Microsoft’s recent quarterly earnings, Surface Revenues have more than doubled to over $900 million compared to the previous quarter.  So how is it performing during the busiest shopping season of the year?

Pacific Crest Analyst Brendan Barnicle is bullish on Microsoft’s Surface Pro 3 line and its holiday sales, saying:

“Over the past week we spoke with more than 50 retailers across the United States. They reported surprisingly strong sales of Surface Pro 3,” Barnicle said in a research note late Monday. “It is increasingly viewed as a laptop replacement for business users and students. Inventory levels are lean, with most retailers averaging six to eight days of sales on hand. Channel partners expect that Surface Pro 3 strength can continue into the new year as enterprise clients are showing more interest in the product.”

He expects Surface Pro 3 to continue its positive momentum throughout the holiday season and contribute a significant increase in revenue for Microsoft’s fiscal Q1.  Particularly due to recent effective advertising such as the newest TV ad comparing it to the MacBook Air to the song tune of “winter wonderland”- which has gathered over 6.8 million views on YouTube so far and is continually shown on television.

With recent rumors of Microsoft going for an even bigger display on their next Surface Pro model, it seems they have hit the sweet spot and advertising it as a laptop replacement has proven to be a successful formula.  This new model is rumored to launch with Windows 10, which so far has a fantastic reputation.  This can be a huge catalyst in driving sales to a much higher volume, especially as businesses adopt this new OS in significant numbers (something that did not happen and will not happen with Windows 8/8.1).

All in all many will agree that Microsoft has definitely made a strong statement with the Surface Pro line and started a new category of hybrid devices that will not only reinvigorate the PC market but penetrate the tablet market as more OEMs join the trend.


Microsoft increases tablet share in the US thanks to Surface 2

surface 2

According to Chitika, Microsoft’s tablet market share has increased by 60% year-over-year when collecting data for the month of September. However percentage-wise it’s still only at 1.6% of the overall tablet market in the US, while Apple is in a very comfortable lead at 79.9%.

It’s worth mentioning that this only takes into account Windows RT which includes the original Surface RT and Surface 2, and does not include any of the Pro models.  Surface Pro 3 is reportedly selling well for Microsoft and we’re curious to see how the numbers would compare when taking into account all the Surface Pro models.

Chitika tablet market share

When comparing to other OEMs in the tablet market, it doesn’t look too bad for Microsoft as they all seem to be in the single digits percentage-wise. If Microsoft releases the long awaited Surface Mini and upgrades its current crop of Windows RT devices (not sure if they will) then moving up a rank or two seems plausible.

Here is the method that Chitika uses to determine their results:

To determine the distribution of Web usage among leading tablet brands for September 2014, Chitika Insights sampled tens of millions of U.S. and Canadian tablet-based online ad impressions running through the Chitika Ad Network. The data used to compile current usage share were drawn across the time range of September 1 through 30, 2014. The historical year-over-year data were drawn across the time range of September 1 through 30, 2013.

Source: Chitika