SEATTLE—Microsoft executives on Tuesday admitted that the company and its partners must do a far better job of “just the basics” and said they need to “nail the fundamentals,” starting with security.
“We have a lot of work to do to make that happen. The biggest investment from Microsoft on that front is in the Windows XP Service Pack 2, which will deliver security enhancements,” Tom Button, Microsofts corporate vice president for the Windows client, said at the Windows Hardware Engineering Conference (WinHEC) here Tuesday.
In a session titled “Windows Business Priorities and Opportunities,” Button said, “We need to drive the PC industrys health overall by increasing customer satisfaction and trust and decreasing support costs.”
A great opportunity also exists for Microsoft to migrate its installed base and move from legacy Windows 9x PCs [those running Windows 98, 98SE, Windows ME and Windows 95] to computers based on Windows XP SP2—and to get the existing XP base to SP2.
Button said the PCs still running legacy 9x code comprise more than half of the overall installed base, adding that many of Windows XPs features are largely misunderstood and undermarketed.
“You will see a lot more communication from Microsoft targeting the 9x code base, but the reality is that the number of people running the 9x who actually have XP-capable hardware is pretty low,” Button said.
“So, most of the opportunity here is not about selling a retail copy of Windows XP onto an old piece of hardware; its really about helping people understand the benefits of moving on to a new PC or of adding a new PC to their lives. So, a lot of the initiatives revolve around working with our OEM partners to drive demand,” he said.
Microsofts Protect your PC campaign this fall will center on the release of Windows XP SP2, which has advanced security technologies to provide an improved security infrastructure, security tools for manageability and control, as well as improved and more secure user experiences, Button said.
“Microsoft is planning a unified approach to our fourth-quarter launches, including end-user outreach,” he said. “The campaign kicks off in October and will overlap with the new security campaign around XP SP2, and then our new products and technologies will be released in mid-October.”
PC Growth Looking Strong
Button said growth in PC shipments looks strong for 2004. “Right now, we are observing 16 percent year-over-year growth rates worldwide, with 50 percent of the growth coming from emerging markets, and 80 percent of that 50 percent coming from just four countries: Russia, China, India and Brazil,” he said.
While average selling prices for PCs declined 8 percent from 2001 to 2003, desktop profitability rose during the same period. Notebook sales were outperforming desktop sales, with “thin and light” notebook growth dominating both the business and consumer markets.
Microsoft Research is predicting that two-thirds of growth in developed markets of the consumer notebook space will be for additional PCs, Button said.
Opportunities also lie within the premium markets, Button said, where Microsoft and its hardware partners can evangelize compelling new usage scenarios, innovate and extend the Windows PC platform, drive demand for custom PCs and reignite the enthusiast community.
“Premium Windows PC market opportunities currently available include 64-bit computing, our Media Center and the Tablet PC,” Button said. “We are driving these initiatives today, and we see 64-bit computing has the potential to become mainstream within 12 months and to become the dominant architecture customers will be demanding in two to three years.”
Windows XP Media Center Version 2 has just been released, and the third version will be delivered before the year-end holiday season, Button said, adding that the Tablet PC is seeing a strong surge in interest so far this year.
But making the Tablet PC more mainstream requires better hardware, a better battery life and higher-quality digitizing and displays. In a demo of the next version of the Tablet, code-named Lonestar, Button showed improvements in the recognition and conversion of writing (ink) to text.
On the Outlook front, the e-mail service has been made context-aware, while a number of new third-party applications have also been developed, Button said.
One application allows users to create their own font, which can be turned into the desktop font, allowing you to see your handwriting across the desktop. “It is the ultimate personalization tool,” he said, to much laughter from the audience.
One area where Microsoft is spending an ever-increasing amount of time is in emerging markets, which are showing major industry growth—particularly Russia, India, Brazil and China.
“But these markets require new products and business models that are affordable, accessible and durable, that will stand up in the face of unreliable electricity and on-and-off connectivity,” Button said.