Next week, Microsoft is expected to launch a Surface Mini, and perhaps another, larger Surface device to add to its tablet PC portfolio. The idea of Surface Mini certainly makes sense; smaller slates are seeing growth, so a seven- or eight-inch model could potentially capitalise on that nicely.
The arrival of the third-generation of the Surface (perhaps a Surface Pro 3) would also help Microsoft's tablet prospects in another way: it usually takes tech companies three versions of any new device to fix all the flaws spotted in the product.
The first-gen Surface RT and Surface Pro tablets were released in October 2012 and February 2013 respectively. Their successors, the Surface 2 and Surface Pro 2, arrived in October 2013. But sales remain low, probably somewhere around two to three percent of the worldwide tablet market.
The numbers Microsoft has released about the Surface tell part of the story. Microsoft reported Surface revenue of $494m in its most recent third quarter report, but the costs associated with generating that revenue (which include manufacturing and distribution of the devices) hit $539m.
The same thing happened in the previous quarter, covering the three months to December 31 last year: Surface revenues hit $893m, but at a cost of revenue of $932m. In Microsoft's Q1, Surface revenue stood at $400m and the cost of revenue at $645m (before that Microsoft reported Surface revenue of $853m in its Q4 2012 — along with a $900m write-down on Surface RT inventory).
According to these numbers, Surface is still costing more to make and distribute than Microsoft is making from selling it.
So how long will can Microsoft continue to build 'tablet PCs' that are snubbed by consumers? The answer is probably as long as it takes.
Read more at: Microsoft's Surface strategy: As long as it takes | ZDNet
