News

Microsoft Exec Talks Windows 8 Device Hurdles, Cloud Plans

• By Kurt Mackie
• June 02, 2013

Microsoft Chief Operating Officer Kevin Turner detailed his company's market positions, cloud growth prospects and other business matters at the Sanford C. Bernstein Conference in New York City last week.

Turner's talk reinforced Microsoft's previously announced devices and services transformation, though he added a few nuances along the way.

Office Leads the Way
For instance, while most people typically identify Microsoft by its Window operating system, Turner explained that "Windows is now our third biggest business" (Word .DOC, transcript). It's the Microsoft Office Division that brought in the most revenue (32%) in Microsoft's last fiscal third quarter, followed by Server and Tools (26%), the Windows Division (25%), Entertainment and Devices (13%) and Online Services (4%), per a Microsoft slide deck presented by Turner (PowerPoint Web App).

Microsoft's most recent 10-Q filing further clarifies that the Microsoft Business Division, which includes Office products and Microsoft Dynamics products, predominately brings in revenues based on Office sales. Those Office products, which include Microsoft Office, SharePoint, Exchange, Lync and Office 365, generated more than 90% of the Business Division's revenue, according to Microsoft's 10-Q filing (Word .DOC).

Turner continued Microsoft's poker-faced stance on whether the company would build Office versions for Android devices. Investors have claimed that Microsoft could better monetize Office by making it available on the most widespread mobile OS platform, namely, the Linux-based Android. Instead, Turner pointed to the availability of Office applications on both Android and iOS platforms via browser-based Office Web Apps. The idea that Office will just be available on those mobile platforms via Office Web Apps echoes a stance taken earlier this year by Microsoft CEO Steve Ballmer.

Turner claimed that the Office Web Apps experience across mobile OS platforms is similar.

"We offer the same fidelity viewing and editing capabilities in the cloud across all platforms, and it's something that we're going to continue to nurture as well," Turner said. He pointed to a PC Magazine survey ranking Windows Phone ahead of Android and iOS in terms of customer satisfaction, although Microsoft's mobile OS badly trails those two mobile OS market leaders.

Windows 8 Held Back by Lack of Touch Devices?
In response to a question at the event that "Windows 8 has had a lukewarm reception," Turner said that there was a lack of touch devices holding it back, and that user satisfaction was highest with Windows 8 running on touch-based devices. "Where we have a non-touch device it's not [the highest user satisfaction]," he added.

Turner defended Microsoft's newly described Windows 8.1, adding that the forthcoming release won't be a service pack. He said that Windows 8.1 will be an OS "update," based on customer feedback, which will add new features. He explained that Microsoft worked to reinvent "an entire ecosystem" with Windows 8 and that there would be a transition in terms of adoption that would take time.

"So we have all of the safety, all of the security, that enterprises love built into the OS, in addition to, for the very first time in our history, we now have a consistent user experience across the phone, the tablet, the slate, the laptop, the desktop, and the TV, with Xbox TV," Turner said about the Windows 8 "Metro" user interface.

Some observers are wondering about the ARM side, running the Windows RT OS, because it's thought that sales of Microsoft Surface RT devices have been low. Coincidentally, Microsoft appears to be rolling out Surface RTs in a fire sale of sorts.

For instance, Tech-Ed attendees next week will be able to take advantage of discounted Surface RT prices. Those persons registered to attend TechEd will be able to buy the Surface RT 64 GB model with a touch cover for $99.99 or the Surface Pro 128 GB model (without cover) for $399.99.

In addition, Microsoft announced a limited-time offer to the general public on Friday on Surface RT sales. Surface RT buyers can get a free Touch Cover or Type Cover with the purchase of a new Surface RT within an unspecified time span.

Microsoft may just be clearing out inventory to make room for Surface RT products to come with these offers, according to veteran Microsoft watcher Mary Jo Foley. Turner at least threw cold water on the idea that Microsoft is planning to abandon supporting Windows RT on ARM-based hardware. In response to a question to that effect, Turner said that "we're going to strategically continue to invest in ARM."

Turner also responded to a question about the limited availability of Microsoft Surface devices to corporate clients. He said that Microsoft is building up its supply chain and broadening its sales channels, as well as planning to distribute Surface to "more and more retail locations."

Microsoft's Heavy Cloud Enterprise Focus
Microsoft provides products and services mostly to the enterprise (53%), followed by original equipment manufacturers (21%), consumers (20%) and small-to-medium businesses (6%). The company's focus, going forward, will be on four key areas, including the cloud, social, mobility and big data, according to Turner.

Turner also hinted at a product release acceleration to come from Microsoft.

"We basically are about to launch every single product, solution, and service in our portfolio in a 12-month window," he said, adding that the accelerated cadence represented a "foundational" change for the company.

The cloud is where Microsoft plans to expand its revenue-making operations in terms of servicing its largest market, the enterprise segment.

"Microsoft still has a relatively low share of wallet on enterprise spend because we're software, not hardware, in the enterprise," Turner said. "And when you think about our potential to grow that share of wallet, we see it coming from the reliance on cloud services."

He identified three cloud markets. The private cloud can be hosted by the customer or a partner. The public cloud is Microsoft's Windows Azure platform-as-a-service offerings. The third cloud, according to Turner, is the hybrid cloud that taps private and public infrastructure. Microsoft expects to cement its cloud offerings in the enterprise space based on the use of its familiar tools, such as Active Directory and System Center, which work across premises and cloud environments. Turner said that the majority of its business customers use those two management products.