Amy Hood, CFO of Microsoft® began her presentation of quarterly results by noting continued decline in the consumer X86 computing device market. On the other hand, she went on to note, consumers continued to “prioritize” devices emphasizing “touch and mobility.” Enterprise products and cloud solutions sales continued to demonstrate strength. She reported on management’s continued efforts to transition business development to better service “this modern era of computing” which has moved beyond the “traditional PC”.
Ms. Hood cited the June preview of Windows 8.1 as an example of the company’s progress on meeting its objectives. She also pointed to a deal with Best Buy to build Microsoft branded stores within 600 Best Buy locations. Finally she hinted at the company’s interest in bringing additional “small screen” consumer devices to market, quickly, with a mention of the release of an 8 inch version of the Surface tablet computer, with Microsoft Office and a retail price under $400.00.
Ms. Hood also mentions a $900 million right down for the Surface RT tablet computer and a reduction in the retail price of the device to $349.00. She framed the right down and the price reduction as necessary steps Microsoft needed to take to step further into targeted consumer markets.
The operating system business for Microsoft is approximately 25% of total quarterly sales. So steps certainly needed to be taken quickly to shore this unit up quickly. It also makes perfect sense to staunch bleeding with a product right down and a recalibration of retail pricing to build its own unique brand in the consumer computing market.
As of August 7, 2013, this right down and product re-pricing has already produced positive effects: rumors of Walmart selling out its stock and mention in IDC’s report on tablet sales for the second quarter, 2013 where there is a note of an improved position for Microsoft entries to the market.
© IMB Enterprises, Inc. & Ira Michael Blonder, 2013 All Rights Reserved