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February 4, 2013 at 9:00 AM

Windows CFO Tami Reller talks Windows 8, Surface and marketing

TamiReller.jpg

Microsoft rolled the dice big time last October, launching with great fanfare two of the biggest gambles in its history: Windows 8 a radical revision of the company’s flagship operating system, and Surface, its first branded computing device.

Ninety days later, reports are coming in about how that gamble is beginning to play out: Not disastrously, certainly, but also not the big boost for the company — and the PC industry — that many had hoped for.

The line out of Redmond these days is that it’s early days yet for Windows 8, with more and better touchscreen laptops, tablets and convertible devices coming out, in a wider range of prices.

“Windows 8 is a generational change and one selling season does not make up a generation,” said Tami Reller, Microsoft’s chief marketing officer and chief financial officer for Windows. “We’re really only just getting started. … We’re moving as fast as we can. There’s a lot of great stuff coming down.”

Reller herself has been part of recent big changes at Microsoft, having been appointed one of the two top leaders (with Julie Larson-Green, corporate vice president for Windows product development) of the Windows division after former division President Steven Sinofsky stepped down abruptly in November.

Ahead of the Surface with Windows 8 Pro launch later this week, Reller sat down for an interview to give her perspective on how Windows 8 and Surface have fared and what we might see in 2013.

Here is the interview, edited for length.

Q: There’s been quite a bit written about how Windows 8 has gotten off to a slow start and hasn’t provided the big boost to PC sales that previous launches of Windows have. Can you give your thoughts on that?

A: It’s challenging to try to do direct comparisons when things are so different. Windows 8 is a big, ambitious change. It’s a change that is going to drive opportunity for several selling seasons.

Windows 8 allows us to not only play brilliantly in the PC market, but also to play broadly in the device market, which is massive. We’ve only just begun that effort. We look at it and say: We have this opportunity to play in this much, much larger space and to do it with an OS that is going to scale across that and give the same great experience across that.

Q: Microsoft has said 60 million Windows 8 licenses have been sold so far. What exactly does that involve?

A: Sixty-million 60 million licenses is consistent with the way we counted with Windows 7. We wanted to make it straightforward and transparent that way. It’s OEM [original equipment manufacturer] licenses [meaning manufacturers who pay Microsoft for use of Windows in the PCs that they produce]. And it’s monetized upgrades [meaning customers who’ve purchased upgrades either online or from retail stores].

Q: Microsoft is reportedly spending more than a billion dollars on marketing for Windows 8 and Surface. Do you feel you’ve gotten good return on that investment?

A: I feel like it’s some of the best marketing that we’ve done. It has given us record awareness of the products. And it’s driven real interest. …

Now, because we have this large level of awareness, we can move to marketing that allows us to even show off the product more.

Q: Microsoft didn’t reveal any sales figures for Surface RT in its recent second quarter earnings report. Analysts have estimated sales at anywhere from 230,000 to short of a million. Can you offer any figures?

A: We really put the focus on Q2 in telling the Windows 8 story. Surface is certainly part of that story but the Windows 8 story is much broader.

February marks a really important time for Surface. Expanding is really the word: Expanding into retail, expanding with Pro, expanding the markets where it’s available.

There will come a time when we’ll say more but right now we’re really focused on making sure that more customers can get their hands on the product.

Q: One of the criticisms of the Surface tablets — both the RT and the Pro — is that they’re priced too high. Is Microsoft considering any kind of special promotions or pricing deals?

A: We feel great about the value provided with Surface RT. Then you look at Surface Pro and you say: “Wow, this is one of the best laptops that’s ever been built.” It has touch, incredible design, Core i5. It is an amazing laptop and you get a tablet package with it. We feel great about the value for the money.

Q: How is the company handling its relationships with hardware manufacturers differently now that Microsoft is making its own computing devices?

A: Our OEM partners are more important than ever. They’re doing more innovation than ever before. [Reller moved on to showing, along with a Windows colleague, a variety of Windows 8 devices that are currently and will soon be available, in a range of price points, running variously on ARM, Intel Core i5 or Atom chips, with some targeted to consumers and some to business users.]

Q: It’s been about two months since you and Julie Larson-Green took over the leadership of the Windows division. Are there any major changes in focus or the way the divison runs?

A: It’s been great. Julie and I knew how to work together before. I would say that things got back to full productivity very fast. …

There’s a few words that I think describe how the Windows division is operating and feeling: a lot of agility, a lot of optimism for what’s ahead.

Q: Is Microsoft planning a smaller Surface tablet? A smaller Microsoft tablet?

A: Windows 8 gives us such an opportunity to bring this experience to form factors that are interesting. … You saw the same, consistent high quality touch experience across all these form factors.

(Photo of Tami Reller from Microsoft)

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