Surface Pro 4 has strong first quarter, Windows Phone revenue drops sharply in the period

Surface Pro 4 has strong first quarter, Windows Phone revenue drops sharply in the period
Microsoft reported its first quarter earnings figures today. Non-GAAP revenue amounted to $22.1 billion while GAAP revenue totaled $20.5 billlion. Non-GAAP net was $5 billion (62 cents per share) while GAAP net totaled $3.8 billion (or 47 cents per share). It was a great quarter for the Surface Pro 4 tablet and the hybrid Surface Book. During the first quarter, revenue for the Surface unit rose 61% in constant currency. 

While Microsoft has found a winner in the mobile space with the Surface Pro tablet, it continues to have difficulties gaining any traction with its smartphone division. For the three month period covering January through March, Microsoft's phone revenue declined 46% in constant currency. The first quarter of 2016 was the first to include a full three month's worth of revenue from Microsoft's first trio of Windows 10 Mobile powered handsets. Those three models are the Microsoft Lumia 950, Microsoft Lumia 950 XL and the Microsoft Lumia 550.

Microsoft actually makes more money from licensing patents to Android device manufacturers, than it makes from selling Windows Phone handsets. But Microsoft can't just stop making phones. The software giant needs to continue selling Windows powered handsdets in order to offer a complete ecosystem that includes PCs, tablets, laptops, video game consoles and wearables.

source: Microsoft via MSPowerusers

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Surface Pro 4
  • Display 12.3" 2736 x 1824 pixels
  • Camera 8 MP / 5 MP front
  • Processor Intel Core-i7
  • Storage 1000 GB

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50 Comments

1. sip1995

Posts: 1771; Member since: Feb 07, 2014

Troll comments be like "Windows Phone is dead".....

4. jellmoo

Posts: 2533; Member since: Oct 31, 2011

It might not be dead, but considering the absolutely abysmal job Microsoft has done with it, to the utter detriment of their fans and user base, maybe it should be...

11. jroc74

Posts: 6023; Member since: Dec 30, 2010

I agree. I keep saying this...at some point the money invested in the phones has to be weighed against the money lost. They got out the media player business and survived. I think they can get out the phone business and survive. Many probably dont know or even remember the Zune.

12. meanestgenius

Posts: 21485; Member since: May 28, 2014

Consider this: Microsoft makes a whole lot of money from patents they own that Android vendors use. They also cut back on the number of phones they said they would be releasing on a yearly basis. When you factor those two things in, I'd say that they have enough money to cover to expenses incurred from handsets. Now, if the Surface Phone doesn't make a sizable impact when it's released, that will be cause to worry.

15. NexusKoolaid

Posts: 493; Member since: Oct 24, 2011

Note however the revenue they've been taking in from Android has been on the decline, according to reports down 26% from last year. It's been said this is due in large part to market share going to cheap phones from Chinese manufacturers that generally aren't all that enthusiastic to license foreign IP. If the trend continues the pressure to make some decisive changes in MS mobile strategy could nudge their handset business a little closer to the chopping block.

18. meanestgenius

Posts: 21485; Member since: May 28, 2014

While it's true that the revenue received from Android vendors has decreased, I think that by the time it decreases to the point where it's not making much of an impact for Microsoft, they will have released the Surface Phone to help turn their smartphone woes around. Add to that other Windows OEM's stepping up to the plate like HP with the X3, and I definitely think Microsoft has a chance to change their smartphone woes for the better.

17. jellmoo

Posts: 2533; Member since: Oct 31, 2011

The question is though: Should they? They could just take that money they are losing and re-invest it in another, more profitable venture. Shareholders would get a better return, and the company would shore up a money losing group. The thing is, I *like* Windows Phone. I really want there to be a viable third mobile OS option. But Microsoft have done such a horrendous job with the platform and burned bridges with their own fanbase so many times that I can't see them recovering and suddenly finding mobile success.

19. meanestgenius

Posts: 21485; Member since: May 28, 2014

I think Microsoft should absolutely stay in the handset business. If anything, to help complete the vision that they now have. Mobile phones will play an integral part in that. I also believe that Microsoft wants to bury the Lumia name and push the Surface name. Lumia came about from Nokia, and Nadella was not a fan of the Nokia purchase to begin with. Nadellla wants to create his own legacy in mobile phones via the Surface Phone.

28. joey_sfb

Posts: 6794; Member since: Mar 29, 2012

Another trend is companies stop the practice of buying mobile handset for staff. We used to buy carton boxes of BlackBerry for staff. Now BYOD. Most people bring their iPhone or mid to high end Android handset.

32. jellmoo

Posts: 2533; Member since: Oct 31, 2011

But do they need to own the platform and manufacture the hardware in order to complete that vision? Can they complete that vision by offering software and cloud based services/solutions instead? Ultimately, the issue becomes: What can they do? What can they do that they haven't done to actually have a true impact in the mobile space? Their hardware has been poorly received and their software hasn't attracted the developers they so strongly need. What can the Surface Phone provide that will really resonate with consumers?

33. meanestgenius

Posts: 21485; Member since: May 28, 2014

The Surface Phone is going to be pushed hard in enterprise, and then towards consumers. Microsoft will definitely have to pull out all the stops to attract people away from competing platforms. With Universal Windows Apps, Microsoft having tools for developers port iOS apps to Windows, message everywhere, Continuum, etc, I think Microsoft can pull it off. Not saying it'll be easy, because it won't, but I believe they can do it, especially in the enterprise space. If the sales of the Surface tablet in enterprise are any indication, I believe a Surface Phone will do well there. Owning the platform AND manufacturing the hardware is a way to ensure the best possible user experience. And if Microsoft truly wants to grow in the smartphone space, they need to spearhead the push. If they don't, it may be perceived by consumers and Windows OEM's that Microsoft isn't taking their own platform seriously. Handsets are an integral part in Microsofts "One experience across multiple devices" strategy.

42. 2.5GHz

Posts: 270; Member since: Apr 03, 2016

So, you're a fan of Microsoft now, MG?

43. meanestgenius

Posts: 21485; Member since: May 28, 2014

I'm a fan of good tech. And I've always preferred to stray away from the herd. I'm a fan of using different things when it comes to tech, especially if said tech works well for me. I've used many OS's extensively, including BB10, BBOS.x, Windows, iOS, Android, Palm, and Symbian. I've used Windows dating back to Windows Mobile 5.0. My preferred OS's of choice now are BB10, Windows 10 for Mobile, and BlackBerry's flavor of Android. iOS currently has my attention on the tablet front, but I'm also looking to add a Windows 10 tablet into the mix. I'd gladly sell/trade my iPad Pro 9.7 inch for a Surface Pro 3 or 4.

48. 2.5GHz

Posts: 270; Member since: Apr 03, 2016

Fine. But to me, good tech is only in the Android ecosystem. Nothing else matters! :D

44. Plutonium239

Posts: 1154; Member since: Mar 17, 2015

They already are investing into AR with the Hololens...

30. TechieXP1969

Posts: 14967; Member since: Sep 25, 2013

That's not the problem. The problem is, we have Android and iOS; so we don't need Microsoft. We don't need a 3rd option, because no one can offer more than Android. Windows,Mobile could have been what Android is, if MS was smart. Well if Balmer was smart. Also, Windows Mobile was mostly used by businesses. Once iOS and Android came and those Enterprises decided it was better not to spend money on Windows Mobile and Blackberries anymore and let people just use what they have, there is just no need for those options.

31. meanestgenius

Posts: 21485; Member since: May 28, 2014

We will ALWAYS need more than two options. Not everyone wants to use Android and iOS. CHOICE is always what's best for the consumer. Also, Windows Mobile, BlackBerry and Nokia's Symbian basically was Android and iOS before Android and iOS came into existence. NOTHING stays on top forever.

37. joey_sfb

Posts: 6794; Member since: Mar 29, 2012

WP is basically completing with iOS not Android. Both have similar walled garden ecosystem exclusive to their mobile OS. A lot of countries Android phone could exist without any Google apps or services. We also can install software via a file manager which both iOS and WP lacks.

41. OdysseasP

Posts: 67; Member since: Aug 08, 2014

Windows 10 Mobile is dead whether you want to admit it or not. Simply put the sales volume is not sustainable. I have a Nokia Lumia 1020 for more than two years but I already know that my next smartphone will feature Android OS. Even in the very few areas in which Windows Phone 8.1 had an advantage over Android (sandboxed applications, offline navigation maps, camera hardware & performance mainly) either the competition has caught up or even exceeded it in some cases (Panasonic DMC-CM1 1 inch camera sensor combined with Leica optics) or it moved light years ahead in other areas (app ecosystem, Doze mode) overcompensating for any lack in other fields.

2. Martineverest

Posts: 521; Member since: Oct 27, 2015

It's obvious... Surface phone is coming. IPhone pro and s8 pro should beware!

6. Johnnokia

Posts: 1158; Member since: May 27, 2012

What is S8 pro?

3. TypicalGeek

Posts: 209; Member since: Feb 19, 2015

And pessimists predicted that Surface like would fail. It will never beat Macbooks, they say.

8. jove39

Posts: 2140; Member since: Oct 18, 2011

Macbooks are good compared to any other laptop (outer-shell)...it's OS X that sucks...it's utter piece of crap...only good thing about OS X is it's Unix (BSD) based. For hipsters...it look good.

5. Tziggy14

Posts: 623; Member since: Sep 02, 2014

$20.5 billion? hmm. Not good MS, Google's made only $300 mil less than that same quarter. Don't fall behind your biggest competitor. lol.

7. meanestgenius

Posts: 21485; Member since: May 28, 2014

Microsofts Surface line of products is on a roll! I remember when so many people doubted it, and yet, it prevailed anyway. Their various cloud and office services are doing well, also. Only handsets is a sore spot. I'm eagerly awaiting the release of the Surface Phone. I believe Microsofts downward trend in handsets will be reversed once it's released.

9. jove39

Posts: 2140; Member since: Oct 18, 2011

That's good news...keep up good work on Surface Pro MS.

10. Crispin_Gatieza

Posts: 3098; Member since: Jan 23, 2014

It's only going to get better but unless you get your Windows news elsewhere, you'd never know it. I've been playing with the new "Messaging Everywhere" feature in the newest Insider build (14327.1000) and it's going to be a game changer, mark my words.

13. MrElectrifyer

Posts: 3960; Member since: Oct 21, 2014

I read that it'll require you to sign in with your Microsoft account, that's a fail IMO. Don't need Microsoft to start data mining my text messages in addition to everything else Cortana already data mines. AirDroid does it via Wi-FI. Also, iOS + Mac OS X does it via WiFi and Bluetooth, no need to go through apple's servers unless you enable iMessage.

21. Crispin_Gatieza

Posts: 3098; Member since: Jan 23, 2014

Well duh! How are your messages suppose to sync across all your devices if you're not signed in? Also, you can activate a Windows Mobile phone without ever signing in to your MS account. Obviously you won't have access to the Store but your phone will function and you can sideload XAPs if you have them. On iOS, you're not activating until you sign in with your Apple ID. That's mandatory, so you tell me who's more invasive.

25. MrElectrifyer

Posts: 3960; Member since: Oct 21, 2014

"Well duh! How are your messages suppose to sync across all your devices if you're not signed in?" Via local WiFi/Bluetooth, duh! That's how AirDroid and continuity on apple's devices do it. "On iOS, you're not activating until you sign in with your Apple ID" Uhm, WTF are you talking about? Through out my years of using iPhones, to activate the device, all I needed was an appropriate SIM card and access to the internet on the device via WiFi, or the bloated iTunes on my Windows PC with Internet. No need to ever sign in with iCloud. Also, you can log-in to the AppStore separate from iCloud log-in, so, really not sure how that's invasive.

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