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5 major revelations hidden in Microsoft's earnings report

Brad Chacos | July 24, 2014
Financial results are oh-so boring, but Microsoft's latest quarterly results hid a surprising number of juicy tidbits about Surface, Nokia, the future of Windows, and more.

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Financial results and earnings calls are typically as boring as boring can be. Estimates, projections, GAAP versus non-GAAP results, yaaaaaaaawn.

But Microsoft's financial results and quarterly earnings call yesterday gleefully bucked that depressing trend. If you managed to stay awake through the onslaught of numbers and esoteric terms, some very interesting takeaways were tucked within--takeaways that reveal things that even everyday PC users should be interested in.

Without further ado, here are the five most important revelations hidden in the Microsoft earnings that you should care about.

1. Yes, there was a Surface Mini
Microsoft confirmed what we all knew (and the Surface Pro 3's manual hinted at): Yes, a Surface Mini was supposed to launch alongside the Surface Pro 3. The company didn't state that explicitly, but its financial results say Microsoft made "a decision to not ship a new [Surface] form factor." CFO Amy Hood followed that up in Microsoft's earnings call with investors, saying "During the quarter, we reassessed our product roadmap and decided not to ship a new form factor that was under development."

After the Mini was a no-show at the Surface Pro 3 launch, it was immediately reported that Microsoft CEO Satya Nadella and new Nokia transplant-slash-Microsoft Devices head Stephen Elop made the call to cancel the Surface Mini at the last minute, as they were reportedly worried that it wasn't different enough from the horde of small tablets available today. (Microsoft never officially commented on the reports.)

Microsoft's partners had a hard enough time swallowing Microsoft competing directly against them with the larger, hero-like Surfaces; adding a me-too small Surface to the mix may have led to open revolt. Alas, poor Surface Mini; we never knew ye.

2. Microsoft is a hardware giant, but...
Between Xbox, Surface, and the recent Nokia acquisition, Microsoft is a veritable hardware titan. Heck, it sold more phones (36.1 million vs. 35.2 million) than Apple last quarter! But there's a big kicker there: Microsoft's vast hardware empire isn't making it any money.

After paying more than $7 billion for Nokia in April, that division alone lost another $700 million last quarter. Though the numbers are murky, Surface still doesn't appear profitable.

The Xbox One is struggling after a rocky launch, too. Microsoft only sold 100,000 more Xboxes (Ones and 360s combined) this past quarter than it did in the same Xbox 360-only quarter of the year prior, and it neglected to say how many of the 1.1 million Xboxes it did sell were next-gen consoles.

On the plus side, CFO Hood said that the superb Surface Pro 3 is selling at a faster clip than previous Surface iterations, so hey, there's that. Microsoft's plans to lay off half of all Nokia employees should help its phone business make money in the future, though at the expense of 12,500 people's livelihoods, alas.

 

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