Microsoft has revealed in a regulatory filing with the US Securities and Exchange Commission (SEC) that it achieved just $853m in Surface RT and Surface Pro sales during its 2013 fiscal year to the end of June.
CEO Steve Ballmer had revealed that Microsoft would writedown $900m on its Surface RT tablet hardware stock, confirming suggestions that the company was struggling to sell the devices, even after slashing the price of the machine at retail, and offering it at a budget price for the education sector.
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This means that the company earned less in revenue from both Surface RT and Pro than it paid to write down unsold stock of the RT tablet.
In the same period, Microsoft saw its advertising budget increase by $898m associated primarily with the Windows 8 operating system and Surface tablet - $45m more than the Surface tablets had made in revenue.
Surface RT had been lined up by Microsoft to compete with Apple's iPad, Amazon's Kindle Fire and Google's Nexus 7, and was Microsoft's first attempt at hardware aside from its successful Xbox and Xbox 360 video games consoles.
The RT's reviews were generally negative; however, the Surface Pro's specifications were far better as the device was touted as one for an enterprise user. But while Computing, in its in-depth review, believed the device was impressive, others have not been as positive about the device.
Telefonica's Group CIO, Phil Jordan, recently told Computing that the company looked into both Surface RT and Pro but felt that the tablets were only good enough as "companion devices".
"I think if we had given [either Surface tablet] to staff, it wouldn't have been good enough to replace the existing equipment, and it was important for me to only get in a device that could replace a desktop, laptop or tablet environment, that's why we had to up the capability and go for Lenovo's Helix," he said.
Ballmer had suggested at the company's Build 2013 developer's conference that, from now on, third parties will be making hardware and that Microsoft will go back to making the software.
For investors, the SEC filing provided a stark warning from Microsoft that it is making significant investments in new products and services, such as Surface, that may never be profitable.
"We may not achieve significant revenue from new product, service, and distribution channel investments for a number of years, if at all.
"Moreover, new products and services may not be profitable, and even if they are profitable, operating margins for some new products and businesses will not be as high as the margins we have experienced historically," the filing warned.
