Microsoft exec defends Windows 8 sales pace

Touch-enabled hardware in short supply, explains Tami Reller when asked about reports of slow holiday sales

Defending Windows 8 against reports that sales have been sluggish, one of Microsoft's top executives said it will take time for customers to digest the new operating system and for device makers to ramp up production of the hardware users want: Touch-enabled PCs and tablets.

"We all had a strong sense that unique touch devices, particularly touch laptops and tablets, convertibles would be in high demand," said Tami Reller, CFO and chief marketing officer of the Windows division, in a question-and-answer Tuesday at the JP Morgan Tech Forum, which was held in Las Vegas, where CES kicked off Monday. "[But] the level of demand I think surprised a lot of people."

Apparently even Microsoft's computer-making partners underestimated the attraction of touch, which seems odd on its face because Microsoft has touted touch as key to Windows 8 since the OS was introduced more than a year ago. In September 2011, when then-Windows chief Steven Sinofsky debuted Windows 8, he used the phrase "touch first" to describe the new operating system.

"There's touch first with a keyboard and mouse that works just as well as a first-class citizen, your choice of interaction," Sinofsky said, according to a transcript of his presentation. "It's so important to the fundamentals of Windows 8 that you have this no-compromise experience."

In the months that followed, "touch" became a touchstone for Microsoft.

When asked Tuesday about reports that Windows 8 was off to a slow start at retail -- a trend that persisted through the holidays, according to one research firm -- Reller argued that touch-enabled systems have been hard to come by, implying that was one of the reasons for the OS's inability to boost PC sales.

"Frankly, the supply was too short. I mean, there was more demand than there was supply in the types of devices that our customers had the most demand for," Reller said. "And there was some misalignment between where products were distributed and where there was demand."

Even so, Microsoft has sold more than 60 million Windows 8 licenses in its first 10 weeks, Reller said, calling that "roughly in line" with Windows 7 at the same point after its 2009 release. At that time, Microsoft told investors that the sale of 60 million Windows 7 licenses was a single-quarter record.

Reller's description of Windows 8 sales -- defined as licenses sold to computer makers for installation in their new PCs, plus cheaper upgrades sold direct to customers -- was the same as when she spoke at a Credit Suisse-hosted conference in late November. Then too, she used "roughly in line" to compare the new OS with its precursor.

Within the 40 million of November and the 60 million of this week are an unknown number of licenses on PCs that have been built and shipped, but not yet sold to customers, analysts have said. Without system sales figures from Microsoft's OEM partners or Microsoft itself, it is impossible to tell how many devices with already purchased licenses are not yet in customers' hands.

Some estimates and metrics have hinted that the number is considerable: The NPD Group, which tracks retail sales in the U.S., said PC sales for the holidays were down 11% compared to the same period in 2011.

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