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Microsoft to drive Windows tablet strategy with smaller devices, OS rebates

Gregg Keizer | April 22, 2013
Microsoft's chief financial officer yesterday confirmed that the company and its hardware partners would ship smaller, lower-priced Windows tablets in the next months.

Intel's soon-to-retire CEO Paul Otellini talked up Haswell and Bay Trail, and their impact on Windows 8's performance and device prices, on Tuesday. Otellini predicted Windows system and device prices as low as $200 by the fourth quarter.

Klein also acknowledged, with a frankness not expressed thus far by Microsoft's executives, that the giant faces a tough environment.

"There is no doubt that the device market is evolving. Consumers and businesses are increasingly shifting their focus to touch and mobility, and as a result, they want touch-enabled computing devices that are ultrathin, lightweight, and have long battery life," said Klein, admitting that Windows' revenue has been affected by the change from PCs to more mobile devices.

He also called that transition "complicated" for Microsoft, but not surprisingly remained upbeat. "We still have an immense amount of work to do, yet we feel good about the foundation we have laid and are optimistic about the long term success of Windows," Klein said.

Simpler said than done, pointed out Patrick Moorhead, principal analyst at Moor Insights & Strategy.

"Their strategy relies on them bringing something to the table [in tablets]," Moorhead said. "So far, consumers have said that they'd prefer buying tablets and smartphones over PCs. It's going to be hard for Microsoft to turn around to that."

Moorhead pointed out one comment by Klein that struck him as revealing.

When Klein said that part of the Windows strategy relied on devices at competitive prices, the CFO noted those lower prices would be "partly enabled by our latest OEM offerings designed specifically for these smaller devices.

Klein, said Moorhead, was essentially confirming reports last month that Microsoft has discounted OEM prices of Windows and Office 2013.

"MSFT does have an initiative in place to drive smaller tablet [sales] with a cut-rate, rebated operating system," said Moorhead, citing sources of his own. "They'll rebate OEMs if they do certain things, use certain chips and certain form factors. The official program is to drive volume [sales] to the $199 to $399 range."

Klein also said Microsoft's plans rely on Windows "Blue," a code name he used during the call to refer to the Windows 8 upgrade expected to ship this fall, as well as for the accelerated release schedule that Microsoft intends to adopt.

"With Windows 8, we are setting a new, accelerated pace for updates and innovations, as we focus on making the Windows experience richer and better," said Klein. "We will release the next version of Windows, code named Windows Blue, which further advances the vision of Windows 8 as well as responds to customer feedback."

As long-time Microsoft watcher Mary Jo Foley, who blogs for ZDNet, said earlier today, the phrase "responds to customer feedback" may be a reference to plans by Microsoft to tweak some Windows 8 features -- particularly the lack of a Start button and a forced boot to the tile-style Start screen -- in Windows Blue by restoring the first and making the second optional.


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