Was Microsoft’s Surface revenue disappointing during the 2020 pandemic? Don’t think too much.

Microsoft reported for the first time that Surface revenue exceeded $ 2 billion in the last quarter. We always see a huge increase in second quarter results because they follow the holiday momentum in the US, where discounts are often offered to increase volume. Compared to last year, Microsoft grew 3 percent, which is in line with the growth of Surface in recent years.

That’s a good number, $ 2 billion, although it’s little compared to Dell (~ $ 11 billion), HP (~ $ 10.5 billion) and Lenovo (~ $ 14 billion), which have production, distribution and product lines much bigger from Microsoft.

But should we have expected an even more significant number from Microsoft due to the ongoing pandemic and changes in the Homework (WF) and Home Study (SFH) market?

Not really. Here’s why.

These are not the same

Do not compare recipe for PC shipments

I’ve seen some people cite IDC’s “13% rise” number for PC shipments year after year (302 million) as a benchmark, suggesting that Microsoft’s 3% low. This comparison is strange for some reasons.

On the one hand, Microsoft is reporting recipe, not remittances, which is what IDC is estimating. Revenue may vary depending on the price range and volume of the product. Microsoft could have sold fewer surfaces, but more expensive ones (like Surface Studio 2) or many other cheaper ones (Surface Go 2). We don’t know why Microsoft never releases these numbers to the public.

Second, IDC numbers are not appropriate for this assessment because it includes Google Chromebooks. Chromebooks Does compete with Windows PCs, but it’s a separate argument if you’re challenging sales of the Surface PC compared to the rest of the Windows PC segment.

By the figures of rival company Gartner, which not If you count Chromebooks, it is estimated that 275 million PCs were sold in 2020, an increase of 4.8% year on year.

This is a little more serious.

Of course, I just established that comparing an estimate of annual PC shipments to quarterly revenue is a flaw, making the point debatable anyway.

The conclusion, however, is significant: sales of Windows PCs increased in 2020, but it is not a massive resurgence (and Chromebooks also played a big role). It is a bump in a market that has been stable or declining for years. One of the reasons why PC sales were above average in 2019 and 2020 had nothing to do with the pandemic, but with the End of Support for Windows 7, where the company acquired new hardware.

It’s a collision, not a tsunami

The pandemic wave is over low cost devicesnot sophisticated

I don’t think I ever wrote a single review of a Microsoft Surface product in which people didn’t complain about the price being too high. It is a common joke here at Windows Central that when Surface Pro 12 and Surface Laptop 6 are released, we can already anticipate readers’ comments complaining that they are too expensive.

The fact is that Surface is Premiumand, like Apple devices, they usually run higher than some people consider good value. Microsoft has become more aggressive in pricing in recent years (moving from Windows 10 Pro to Home cut $ 100 across all sectors), but Surfaces is still more expensive than comparable devices from the big three: HP, Dell and Lenovo.

that is a Good thing. If Microsoft were suddenly underestimating HP, Dell, Lenovo, not to mention Acer, ASUS, Razer, MSI and others, I am sure their “partners” would not be happy about this. Microsoft is already running a fine line between trying to set a standard and annoying its hardware colleagues.

I bring it all up because the product mix that sold the most during this pandemic was low-cost devices. It was the students, who suddenly had to study at home, who needed dedicated school PCs. Schools used to share laptops among students, but now they had to be one by one. And guess what – they weren’t buying Surface Book 3s, but more affordable options from HP, Dell and Lenovo, who specialize in offering various products and support on the spot.

Research firm Gartner reported on this trend in January:

PCs have reappeared as an essential device as consumers, including younger children, are counting on them to work, study, socialize and have fun at home.

For example, Lenovo sells IdeaPad 1 and Windows 10 Home in S Mode for $ 200. HP has just announced its ProBook x360 11 G7. Dell has the Latitude 3190 2 in 1 for $ 539. And we just saw updated EDU laptops starting at $ 185 announced a few days ago.

In addition, the HP (Pavilion, Envy) and Dell (Inspiron) consumer line also fill in the gaps for non-educational devices.

Looking forward to 2020, Microsoft has released Surface Go 2, Surface Laptop Go, Surface Book 3, Surface Duo and the updated Surface Pro X (SQ2). Of these, Surface Go 2 and Surface Laptop Go are the only ones remotely close to being economical for schools or homes that needed an additional computer. Microsoft probably sold more Surface Laptop Go PCs than Surface Laptop 3s, but profit margins are much lower than something like Surface Studio 2: sell more, earn less.

This does not mean that it was all low-cost devices sold in 2020. PCs for home games have also increased due to the entertainment value required when trapped in pseudo-quarantine. Here, the Surface does not compete, but Microsoft does with the Xbox, which did see massive gains linked to the highly successful launch of the Xbox Series S and Xbox Series X.

It’s money in the bank anyway

The surface rotation is OK, Windows 10 Home rotation is on the rise

Finally, although the Surface line probably didn’t benefit from what the market demanded in 2020 (exceptions for Laptop Go and Go 2), Microsoft still wins.

Windows 10 Home license sales revenue grew an astonishing 24% year over year. And who bought the Windows 10 Home licenses? The same OEMs that make low-cost laptops for the education and consumer markets: Dell, HP, Lenovo and Acer.

At the end of the day, it’s all money in the bank for Microsoft, whether it’s going to Surface or Windows. The only important conclusion regarding Surface revenue is that it is consistent and growing year after year. Everything else is just a distraction.