Turning a corner? Microsoft says Surface sales double in quarter

After uneven start, Microsoft appears to be resolving execution issues that held back a more successful rollout of its tablet computer.

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Microsoft's Surface computer has had an uneven time of it since first going on sale last year when the company finally challenged Apple in the tablet business. In fact, Microsoft subsequently was forced to take a $900 million write-down on its Surface RT inventory. But despite the obvious embarrassment, officials maintained that they planned to stick with their strategy for this first tablet designed by Microsoft.

Maybe that wasn't simply wishful thinking.

During the quarter, Microsoft's profits and sales handily beat Wall Street expectations. Net income rose 17 percent to $5.24 billion, or 62 cents per share, compared with $4.5 million, or 53 cents a share during the year-earlier quarter. And in a conference call late Thursday afternoon, Microsoft's executive vice president and chief financial officer, Amy Hood, said the company had registered "meaningful progress" in its consumer business (which also includes Xbox).

Now the surprise: In the quarter, unit sales of the Surface more than doubled from the prior quarter with revenue from the tablet climbing to $400 million.

Without getting into much detail, Hood also said that Microsoft expects "ongoing improvement" in the consumer business during the current quarter. She said that Microsoft expected "a healthy holiday performance across the portfolio" for the products consumer products, including Xbox, adding that better execution -- particularly at the retail level -- had helped sales in the last quarter.

The company's recent Surface refresh , has received a generally good early reception even though app support continues to lag behind Microsoft's rivals. Also, Windows RT remains incompatible with legacy programs.

"My sense is they are ramping up the availability -- which should ramp revenue," said Mark Moerdler, an analyst with Sanford C. Bernstein, who noted the limited consumer availability of the product...that's part of it. "I think they're getting the process down better."

 

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