Microsoft’s results a Surface-level success

Surface Go
Image: Microsoft

Tablet sales have propped up a middling quarter for Redmond and Cupertino says Billy MacInnes



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4 February 2019 | 0

There was an interesting detail which a number of pundits picked up on in Microsoft’s most recent results for its second quarter, namely the performance of its Surface business.

Surface sales rose by 39% to $1.86 billion, compared to the same period last year when Surface revenues grew by only 1%. And the vendor is optimistic the growth will continue with Microsoft chief financial officer Amy Hood predicting the Surface business will increase another 20% in the current quarter.

The surge in Surface revenues helped to mitigate the effects of a decline in Microsoft’s sales of Windows to OEMs, which were down 5% overall. There are some who might be slightly bemused at the fact that Microsoft’s hardware business helped protect the software giant against the consequences of a drop in its operating system sales to hardware OEMs.

But what’s also interesting about the Surface results is that they are, to a certain extent, mirrored in the figures presented by Apple in the same week for its first quarter. Amid all the doom and gloom surrounding the figures for Apple’s iPhone business which, the company admitted, “accounted for significantly more than our entire year-over-year revenue decline”, little attention was paid to the performance of the iPad, which experienced a 17% rise in revenues. This increase, to $6.7 billion, was the iPad’s “highest growth rate in almost six years”, equivalent to 9% of total product revenue.

Apple’s Mac business also grew, up 9% to $7.4 billion, attributable in large part, according to Apple, to the launch of a new MacBook Air and Mac Mini in October.

Just as with Microsoft, Apple’s laptop and tablet business fared pretty well. In the case of the iPad, this suggests there’s been a shift back towards products which had been experiencing sustained declines over the last two years or so.

There had been some debate in the past over whether the arrival of 2-in-1s like many of the Surface models, would signal the beginning of the end for the iPad but the reverse appears to be true. In fact, you could argue that the success of Microsoft’s Surface business may have helped Apple to make the necessary changes to the iPad to reinvent it as a bona fide high-end mobile device rather than just a consumer plaything.

It’s not unfair to say that much of the Surface product range shares the same focus on design values of the Apple laptop and tablet product line-up and, in some instances, vice versa. It’s also worth pointing out that Microsoft is enjoying success in a product category where it is copying Apple’s longheld philosophy of producing the hardware and software itself, rather than relying on a third party to manufacture the hardware to run its operating system and software. Mind you, it didn’t quite work out that way for Microsoft’s mobile phone business, so, you can’t win them all.

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