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Microsoft CFO: Undersupply, not Oversupply, the Concern for Surface Book

Microsoft CFO Amy Hood is not worried about "cannon balling" into the high-end laptop market. In fact, she's concerned about the reverse -- of not having enough supply.

Hood, executive vice president and chief financial officer, was responding to a question from Brent Thill, managing director at UBS, during the UBS Global Technology Conference in San Francisco. Thill wanted to know how Microsoft would avoid cannon balling into the market and instead go in gradually enough.

"Most of the feedback I'm getting now is, 'Where is the supply?' So it's funny that you ask about cannon balling anywhere. Currently the feedback is, 'I'd love to see the Surface Book terabyte in stock for holiday, or I'd love to see the i7,'" Hood said, according to a transcript of the conversation posted on Microsoft's Web site.

The Surface Book is Microsoft's inaugural first-party laptop, featuring a unique hinge and a detachable screen that becomes a "clipboard" -- a tablet with a pen for input.

The Surface Book entered general availability in Microsoft Stores and online on Oct. 26. However, limited quantities are shipping to the stores. According to the online store, none are currently available for immediate shipment. Three models are supposed to ship on Dec. 4 -- the Intel Core i5 with 128GB of storage and 8GB of RAM, the i5/256GB/8GB and the i7/512GB/16GB, which has a discrete GPU (dGPU) built into the keyboard. Models not shipping until Dec. 18, according to the online store, are the i5/256GB/8GB and the i7/256GB/8GB, both with dGPUs. The heavy hitter of the Surface Book line, both in price at $3,199 and in capability at i7/1TB/16GB with a dGPU, isn't listed to ship until Jan. 22.

While Hood essentially laughed off the "cannon ball" question, the question is a legitimate one for Thill to put to Microsoft, which is still getting its bearings in the computer hardware manufacturing market. Early oversupply issues with the first-generation Surface tablets led to fire sales of the devices at Microsoft conferences and a write-down of nearly $1 billion.

Hood did say Microsoft is working to improve the efficiency of its supply chain, which it has been honing now through four generations of the related Surface and Surface Pro tablets.

"You make progress to get more funding. You don't make progress, there's no need to have more funding," she said.

Hood also addressed the point of Microsoft developing the Surface Book, which competes more squarely with OEM partners than did the Surface and Surface Pro. Those business tablets were more of a category-creating device that other vendors have begun to follow. "We've got a lot of demand for high-end Windows machines from creatives and it's a good product to do it," she said of the Surface Book.

Posted by Scott Bekker on November 18, 2015