Microsoft loses money every time it sells a Surface tablet

While Microsoft reported increased Surface revenue for the October to December 2013 quarter of $893 million, more than double the $400 million in the quarter ending September 30, 2013, it pegged the cost of that revenue at $932 million. The difference between what it brought in and what it laid out and thus the amount Microsoft went into the hole, was a brisk $39 million.

It sounds impressive: Microsoft in its latest quarter doubled sales of Surface — the tablet it hoped would compete with the iPad — and brought in twice as much revenue from the product as it did in the previous three-month period. But the Redmond, Wash.-based company still managed to lose millions on its tablets. In its earnings report on Thursday, Microsoft said it sold $893 million worth of Surface tablets in the three months that ended Dec. 31, up from $400 million in the previous quarter. That was more than the $853 million in Surface sales for Microsoft’s entire fiscal 2013, which ended in June. But the company’s “cost of revenue” — what it cost to sell the tablets — was a whopping $932 million in the latest period.