News

Microsoft CFO Hedges on Windows 8 Strategy Questions

• By Kurt Mackie
• February 14, 2013

In response to questions about Microsoft's market strategy with Windows 8, Chief Financial Officer Peter Klein repeated the same basic response: The Windows 8 ecosystem is still evolving.

Klein took questions at the Goldman Sachs Technology and Internet Conference in San Francisco on Wednesday. According to Klein, Microsoft is responding to the 7-inch mobile device trend by enabling different form factors with its newest operating systems. Windows 8 and Windows Phone 8 both share the same OS kernel, Klein said, and Microsoft is well-positioned to deliver a consistent experience across different device form factors.

Klein claimed that Microsoft has "more than doubled the number of certified systems" with Windows 8. "I think you'll see going forward more price points. You'll start to see maybe some lower priced $599 tablets, ultrabooks, touch ultrabooks coming to market on [Intel] Clover Trail and other architectures," he said.

It's not clear from the talk when those different price points would start to take effect. Microsoft's own Surface Windows RT tablet is already selling at that $599 price point, which includes a touch cover. However, the company's x86-based Surface Windows 8 Pro tablet, released on Feb. 9, is priced higher, starting at $1,020 with a touch cover. Meanwhile, Windows 8 ultrabooks can be found starting at around $799.

Klein avoided a question about how the cost of devices might be further reduced. "What we aim to do is make sure we have the right set of experiences at the right price points for a given scenario or customer segment," he said.

Klein said that Microsoft's vertical integration strategy is all about bringing the same experience to different devices, which has worked for its Xbox game console product. He explained that entertainment content delivery on the Xbox is going faster than game use. This sort of entertainment content delivery experience can also be transferred to smartphones or tablets, he added.

Microsoft is aiming for an ecosystem play that delivers a consistent experience across devices, Klein said. And the company is "getting closer and closer every day" to supporting a development platform that will let developers code once and run it everywhere. Veteran Microsoft watcher Mary Jo Foley has speculated that a future "Windows Blue" release could enable such code-porting capability.

Microsoft's involvement in the retail business of selling Windows 8 devices through its Windows Store was about getting feedback from customers, Klein suggested, which is why Microsoft had a "controlled launch" of its Surface devices. Microsoft learned from its retail experience that consumers need to play with Windows 8 devices, and so it has expanded its Surface launch to third-party retailers. Microsoft's retail experience in seeing how the hardware and software work together "benefits the ecosystem," Klein claimed.

Klein said that businesses were continuing to migrate to Windows 7, and that it would occur using "a mix" of old and new hardware. The company has previously indicated that about 60 percent of businesses are now using Windows 7. He added that "enterprises are starting to get interested in Windows 8." When asked about the corporate PC replacement rate, Klein denied that the PC refresh cycle is happening at longer intervals.

Klein's basic theme was that Microsoft wasn't hurting its original equipment manufacturer partners in selling its Surface tablets. The idea is that Microsoft's experience benefits partners as well. However, some partners have hesitated. For instance, Samsung indicated in January that it won't sell Windows RT devices in the United States. Microsoft OEM partner HP similarly has put off building Windows RT tablets, according to a report.

Some financial analysts have already weighed in with a prediction that PC sales will be flat for the next two years.

A recording of Klein's talk at the Goldman Sachs event can be accessed here.