No one ever said that the mobile market was an easy fish to fry. Microsoft is learning this first hand, as both Google and Apple continue to make steady progress in this highly competitive arena.
Sure, it does help that both companies had a bit of a head start.
Microsoft is still playing catchup, and despite hitting a record number of phone sales in the second quarter of 2015 — to the tune of 10 million units — the company’s phone division has its work cut out. Some new numbers that have surfaced provide a hint at just how hard it is for this side of the business.
This filing with the Securities and Exchange Commission shows that Microsoft’s acquisition costs for Nokia have risen over to $9 billion, from the $7.2 billion announced back in 2013.
Even more interesting is the highlight that the new division that Microsoft has created, called ‘Phone Hardware’, brought in $1.4 billion for the abovementioned quarter.
However, the cost of revenue exceeded this figure by $4 million — which ultimately means that Microsoft lost 12 cents per phone, according to analysts.
And this is a figure before the R&D costs are added in, along with other expenses. The only major positive is that unit sales are on the rise, and if Redmond can move more units in the coming months, its Phone Hardware business can get back in the black.
Microsoft CEO Satya Nadella commented on this saying that the company needs to take further action to reduce costs across devices as they move to release Windows 10 hardware.
But there’s no denying that a rethink of the overall mobile strategy is necessary here too.
That, and the launch of some premium hardware to bring users onto the platform.