Lumia letdown: Microsoft phone sales halved in just one year

Microsoft Lumia phones with Windows 10 didn't help

Microsoft is still making a lot of money, but the company is doing it with Surface, Windows 10 and its cloud platform, and definitely not Windows phones.

In fact, Lumia phones sales are down by more than half compared to a year ago, according to the Redmond company's latest financial earnings, in all totaling $6.3 billion (about £4.39b, AU$8.89b) in profit and $20.4 billion (about £14.21b, AU$28.80b) in revenue.

Microsoft sold 4.5 million Windows phones in the second fiscal quarter of 2016, down from the 10.5 million it sold during the same 90 days a year ago. Contrast that with the record 74.8 million iPhones sold by Apple.

All of this is despite the fact that Microsoft launched two Windows 10 Mobile phones at the end of 2015, the Microsoft Lumia 950 and Lumia 950 XL.

Microsoft Surface sales spike

Fortunately for Microsoft, those declining Lumia sales aren't its bread and butter. That distinction belongs to the Surface tablets and new laptop, as well as its cloud platform and Windows 10 software.

Microsoft Surface revenue was up 29% year on year, totalling $1.35 billion (about £94m, AU$1.91bn). Office 365 subscribers grew to 20.6 million, and Windows 10 is now on more than 200 million devices.

The launch of the Microsoft Surface Pro 4, Surface Book and the new operating system helped offset the declining sales of its Lumia line.

Interestingly, there have been rumors that Microsoft will retire the Lumia brand name and launch a fully featured Surface phone in hopes of turning around that unceremoniously halved sales number.