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Microsoft's Surface Business No Longer A Black Hole

|Includes: Microsoft Corporation (MSFT)

It seems as if Microsoft's (NASDAQ: MSFT) Surface Pro 3 is the turning point for the company's tablet business. In last week's earnings report, the company included that Surface revenue clocked in at $908 million for the quarter, pacing at twice the rate Microsoft saw with its predecessor, the Surface 2, and up from $400 million a year ago. In fact, management is so focused on boosting Surface Pro 3 revenue that the Surface 2 is pushed off to the side on its Surface site.

And with the company also disclosing that its costs to build its Surface tablets came in at $839 million, it might mark the first time in the business's short history that it has turned a profit-very good news considering it has been a miserable black hole until now. Of course, Microsoft doesn't disclose profits for Surface and there are many more costs that go into making, distributing, marketing and selling the product. But the fact that it's no longer sitting in a pool of red ink is a good sign for the company.

Microsoft also announced that it will indeed release a Surface Pro 4, likely in 2015. While it will be similar to the Surface Pro 3 in regards to dimensions, we might see it sporting Windows 10, along with other major software upgrades.

It's safe to say, as Business Insider put it, that Microsoft's Surface business has found a lifeline in the Surface Pro 3. It's still tiny in comparison to its competitors, but as long as the next generation impresses, look forward to seeing the Surface to start chipping away at market shares.