Sales of Surface devices leapt up 38 percent during the last quarter to $926 million, according to Microsoft’s latest earnings report. Microsoft currently has two supported products in the range, the Surface Pro 4 and Surface Book. Demand for the devices is likely to be caused by the combination of a major ad campaign and the start of the new academic year, prompting students and teachers to upgrade to new devices.
The growth marks the rebound of Surface from being a dismal failure to what’s widely viewed as the most productive tablet around. When the original Surface launched four years ago, a combination of clunky hardware and limiting Windows RT software led to Microsoft taking a $900 write down on millions of unsold devices. Apple’s iPad remained the undisputed king of tablets.
Instead of backing down, Microsoft decided to learn from its mistakes. Opting not to give up on the Surface concept, it kept building its new device. While the Surface 2 retained many of the problems of its predecessor, things began to look up. Then, in 2014, Microsoft finally abandoned Windows RT on the Surface altogether, unveiling the Surface Pro 3. A new form factor, integrated stylus, a massive advertising campaign and very favourable reviews began to bring in enterprise and professional customers. Students and general consumers soon followed.
Over the past couple of years, the business has grown dramatically, helped by the launch of the Surface Pro 4 and Surface Book laptop last year. While Apple’s iPad business is still far larger overall – iPad revenue last quarter was $4.9 billion – it is struggling to grow further. Microsoft is very rapidly gaining customers, as well as a reputation for being a tablet you can work on.
Apple’s iPad Pro aims to rival the Surface but still falls short in many respects. iOS is generally regarded to be far more limiting than the Surface’s Windows 10. Whereas Surface customers can run anything from note-taking apps to Photoshop and blockbuster games, iPad Pro users are restricted by the limitations of what’s really a mobile platform.
Surface’s growth, combined with a similarly strong outlook for the company’s “intelligent cloud” business, caused Microsoft’s share price to hit an all-time high of $60.75 in after-hours trading yesterday. It’s the highest the company has reached since 1999, back when the technology industry was still emerging. Microsoft’s performance has indicated its projects are finally beginning to pay-off as it gains a lead in its race to a “mobile-first, cloud-first” ecosystem.
“We are helping to lead a profound digital transformation for customers, infusing intelligence across all of our platforms and experiences,” said Satya Nadella, chief executive officer at Microsoft. “We continue to innovate, grow engagement, and build our total addressable market.”
As Surface continues to beat expectations, Microsoft’s other hardware business is still heading straight for the ground. Revenue from sales of the company’s Lumia smartphones crashed down 72 percent in the last quarter as Windows 10 Mobile struggles to gain users. Income from the Xbox division also fell 5 percent due to lower revenue from console sales.
