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Microsoft is actually losing money on its Surface tablets

April 26, 2014

Microsoft posted its third quarter earnings results this week and the software giant is actually losing money on its Surface tablets that it sells to consumers.

So, the more tablets that it sells, the more the company is losing money. Microsoft Thursday declared $494 million in revenue made from the sale of its Surface tablets during the 3rd quarter.

However, Microsoft spent upwards of $539 million in direct costs associated with selling the Surface, thereby losing $45 million in the process.

The corporation reported $1.8 billion in Surface revenue for the nine-month period with costs outweighing revenue by $2.1 billion. That meant a $300 million loss for the period. Microsoft broke out the numbers in its 10-Q form filed with the SEC.

On the revenue/cost matter for the tablet device, Microsoft attributed growing revenue and increased costs to more sales of the Surface.

The overall increase in the cost of revenue was 揹ue mainly to a higher number of units sold,� Microsoft said in its filing.

The message is clear-- nearly 1 1/2 year into the sale of the Surface, the more Windows 8 tablets Microsoft sells, the more it loses money of the device.

The company is quiet about saying how many Surfaces it has sold so it hasn given any unit shipments. That's in stark contrast to the sales of its Xbox, a cash cow for Redmond.

Microsoft says it sold two million Xbox consoles for the third quarter, and 10.6 million for the nine-month period.

The financial details emerged after Microsoft's new CEO Satya Nadella was wooing Wall Street during the company抯 earnings call, assuring them that a new era has begun, now that Steve Ballmer is no longer CEO.

It was Nadella first quarterly conference call running the company, of which, until late last year, he had been a group president in the server and tools unit.

If we were to sum up the quarter in two words, it would be execution and transition.� According to Nadella, 搘e are well on our way to achieving his vision of going into a mobile-first, cloud-first world.�

with every device launch and service launch we keep coming back and reinforcing that vision, because at the end of the day, it    the purpose with which we approached the vision and the execution behind it which is what really counts,� Nadella said during call.

After several years of complacency, absenteeism and poorly thought-through ideas, investors were anxious to know whether he has any big strategic reviews planned for the software behemoth.

one of the things that I feel as the leadership team we have really picked up the pace on is asking the hard questions-� what is the believability of any of our plans and pushing ourselves to the limit. Because to me, I want to be accountable to you all-- to our customers, to our partners, and as a team by executing on our plans very well,� he said.