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Executives

Terry Myerson – Executive Vice President-Operating Systems

Analysts

Philip A. Winslow – Credit Suisse Securities LLC

Microsoft Corporation (MSFT) Credit Suisse 2013 Technology Conference Call December 4, 2013 10:15 AM ET

Philip A. Winslow – Credit Suisse Securities LLC

All right, good morning, everyone. We’re very excited to have Alibaba here, but we’re going to transition onto the next keynote. And we’re in Stanford, okay. The but anyway, very excited to have Microsoft joining us; Terry Myerson, Executive Vice President of Operating Systems. So the way I’d break that down is you are the platform dev guy. So last time, I checked platform was kind of important in Microsoft.

Terry Myerson

so I think it’s quite important to everything.

Philip A. Winslow – Credit Suisse Securities LLC

Everything, exactly. So before we get started, I just have brief remarks here. Okay, before we get started, Microsoft would like to inform you that this presentation does contain forward-looking statements, which are predictions, projections or other statements about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could materially differ, because of factors discussed in Microsoft’s earnings press release and the comments made in the presentation as well as Risk Factors listed in Microsoft SEC filings. Microsoft does not undertake any duty to update any forward-looking statements.

And with that said, so I am going to turn it over to Terry, there’s a couple of sort of these brief remarks to level set things and then we’ll get into Q&A and then we’ll open up to the audience later. So Terry?

Terry Myerson

Thanks, Phil. Let me start by complimenting you on your bowtie.

Philip A. Winslow – Credit Suisse Securities LLC

Thanks.

Terry Myerson

It’s very nice, well into that. But I’d like to start by talking about one question that’s probably on many people’s minds and that’s our – who will be our next CEO, there’s probably – there is one thing that I can officially share on that front and that it will not be me, and so we can – hopefully, we can relax a little more in the next period of time.

So the group I lead at Microsoft is our Operating Systems Group, which includes a family of products, starting with our Windows embedded products, which has enabled so many of our enterprise customers to get their industrial products on to the Internet, connected, remotely manage them and so forth to our Windows Phone, to our Windows tablets and PCs, to the platforms and services, which power our Xbox product as well. So it’s a pretty exciting set of products to work on. It’s somewhat humbling to work on as well given all the users and the people depend on these products around the world.

I get a lot of questions about so many of our products are used in enterprise setting. We certainly get tremendous questions about the consumer usage of these products as well. I think heading into the holidays, there's quite a bit of cautious optimism that things are – this is going to be a good holiday for us. I just looked this morning at Amazon’s website, reviews of some of the new tablets. The Dell Venue Pro is running at 4.5 stars, which is pretty exciting for me to see, because I think just that sort of customer feedback and the customer response to the product is kind of the most important thing, empowers us and gives us – inspires us to do great work. Our most recent IDC report show us outselling the iPhone in one-third of markets they track, which is pretty exciting and of course the new Xbox One, we are selling them as fast as we can make them, and so trying to make more, but…

Philip A. Winslow – Credit Suisse Securities LLC

I think you guys sold a few yesterday – the holiday, so that’s – that’s great.

Terry Myerson

We’ve just recently brought these products together into one group. We’re kind of – we’re very focused on shipping things for this year, but our investment thesis going forward is really rooted in the fact that we want to have one platform that powers all of our devices, so that developers can really target the aggregate scale of Microsoft with their investments, one thing that we have incredible scale with these devices today, but in terms of getting our developers today target one device at a time. We see incredible opportunity to make Microsoft the most compelling place to develop our applications if we can bring both the innovations and the audience together across all of our devices.

At the same time, each of our device form factors does require unique tailored experience I think to really delight the customer. The Xbox has got this magical experience on a four foot screen that I wouldn’t want in my pocket on a four inch screen and likewise I wouldn’t want to scale up Windows Phone to a four foot screen. And so tailoring the experiences to each form factor is another key part of our investment thesis.

And the third one is bringing our cloud services together, so that all of our devices can take advantage of the cloud services, which have historically been unique per device. We’ve had Windows Live, we’ve had Xbox LIVE and now we want all of our devices to be able to take advantage of those. And so it’s a – it’s exciting time. There is – device categories are growing and expanding fast and in many ways, we focus is on delighting customers, because with each happy customer we get, the future feels bright.

Philip A. Winslow – Credit Suisse Securities LLC

With that said, I mean, obviously you now lead all the OS groups, as you mentioned, across the company, and maybe if you could give us more detail on your strategy of actually bringing out that common development platform across all these different devices, like how are we going to sort of actualize that?

Terry Myerson

Well, today the Microsoft has many platforms. The – we have many platforms and many devices that are out there. I mean the number of devices that connect to Windows updates everyday, not sure everyday, but within a month, I think, it’s close to one billion devices every month that are connecting with Windows Update. We have all of our PCs. We have PCs which run on the desktop mode. We have PCs which run in the tile mode. We have phones. We have these embedded devices, we have servers and each of these devices has unique ways for developers to target them and that is both a strength, because it enables developers to do very targeted applications for those devices, but it also doesn’t create the opportunity of the aggregate scale of all those devices. And so enabling developers to write a game, which can run on both Xbox and Windows, is a very interesting opportunity enabling productivity apps to run on the workplace, but also on the phone and tablets. This is just an opportunity we see we can bring to developers and focus on.

Philip A. Winslow – Credit Suisse Securities LLC

So what are the benefits to the end user as well in addition to the company itself from this common development platform?

Terry Myerson

Well, the – on each of these device categories, there is always the killer apps and then there is the tail apps and they synergistically work together. On the PC, Office is the killer approximately, which drives the productivity and this is magical combination of Office and Windows put together that makes these devices the core productivity experience to people.

On Xbox, I don’t know which alien shooting game is the killer app, but each of those – there is these magical apps that put together with the Xbox platform drive the consumer demand for the device, but our goal is to enable those magical applications across all of our device categories. And again, we’re coming back to sort of end user apps, but it’s just as important are these embedded enterprise apps and industrial apps that are just common across all Windows devices around the world, but we want make – bring those across all categories.

Philip A. Winslow – Credit Suisse Securities LLC

Now you've been the head of this new group since July so.

Terry Myerson

Right.

Philip A. Winslow – Credit Suisse Securities LLC

I guess two questions, like what are some of the early kinds of progress in the strategy? But also too, what are the hurdles or challenges that you foresee that you are going to need to overcome over the next couple of years in this role?

Terry Myerson

I mean, progress is always – visible signs of progress will come from shipping products and having delighted customers with those products and that is not something that takes many years, but it certainly takes many months and the products we just shipped this holiday really were planned by individual, completing the Xbox One, completing Windows 8.1, these are challenging and exciting things. I think we’ve just – very important products we deliver into the market and talked about the results from those, but the fruits of the one Microsoft changes that Steve made, really will be seen in 2014 and 2015 and beyond.

Philip A. Winslow – Credit Suisse Securities LLC

Got it. Now let's go back to a comment you made about devices. You talked about some of the new Dell laptops, ASUS, the two in ones.

Terry Myerson

No, they’re tablet actually.

Philip A. Winslow – Credit Suisse Securities LLC

Yes, those are like tablets, but then the ASUS, the Transformer Book, these new devices, how is Microsoft helping, I guess, your OEM partners, bringing some of these new devices into market and sort of with the functionality, but at the appropriate price points?

Terry Myerson

Every OEM conversation has this sort of bipolar nature to it and every OEM has this interest in participating and leading in some of the premium category, so they want to – they have – each OEM has – each partner has their view to the differentiation they are providing and they want to invest in and they want to deliver that differentiation on the Windows platform, so they can participate in the premium category and capture the margins in the premium category, and at the same time, each of these partners is interested in the scale that comes from sort of the lower price – opening price point devices and we engage with our partners on both of those dimensions. What is the differentiation they would like to bring and invest in, so the premium device margin can be captured and then what is the, both the technology and the distribution and business investments we can make to capture the opening price points as well.

Philip A. Winslow – Credit Suisse Securities LLC

Now let's stick with the device theme here and [indiscernible] this is for you if you are out there. So let's talk about ARM versus Intel. He's my semiconductor analyst. So ARM versus Intel, so we – I just want to talk about support in terms of your backwards compatibility of the Operating System and the applications and how you kind of manage the backwards compatibility, but also wanting to bring on new partners like ARM, expand the device ecosystem there with Windows RT. How do you balance that?

Terry Myerson

The core – the familiarity with Windows and the compatibility Windows not just of applications, but also of drivers is the core of our business today. It’s interesting we talk a lot about applications, but device drivers are a whole another element to this. So this an example of this, I was with the customer weeks ago and there was a discussion of printers they purchased years ago and they got to be compatible with the devices and so there's this whole ecosystem built up around compatibility with Windows that’s incredibly valuable to our customers. The – and that compatibility is x86. It is a market, which Intel and AMD serve. They’re great partners and they’re both investing in very exciting innovations and we’re partnering with them or participating in the whole spectrum from the new innovations that’s for premium products all the way down to opening price points. At the same time, the ARM ecosystem has its own set of rich innovations that we need to participate in and the devices they are focused, and so we got a great partnership with QUALCOMM and that’s yielding some very exciting products.

Philip A. Winslow – Credit Suisse Securities LLC

All right, so we’re talking about sort of the overall platform strategy of Windows. One more question about Windows before moving on to Windows Phone, but if we think about 8.1, obviously a big interim release, maybe talk about how we should expect sort of the cadence of we'll just call it big boy Windows versus Windows Phone, the cadence of the versus – we used to think about, okay, big launch, a couple years later…

Terry Myerson

Yes.

Philip A. Winslow – Credit Suisse Securities LLC

…big launch, this was kind of this intermarry 8.1. Is something changing with the release of 8 and how you deliver to the platform?

Terry Myerson

I think with Windows we have consumer – we have a consumer set of devices.

Philip A. Winslow – Credit Suisse Securities LLC

Does this apply to all device categories?

Terry Myerson

So there’s a consumer set of devices and then there is, what I’ll call an enterprise set of devices and one thing that we will continue to do and I think really the world has shown that there really is two different customers really have divergent needs. The consumer really is ready for things to be upgraded on their own, things to be required – you’re able to require a certain set of experiences and do things to consumer devices that IT pros are not – they want to have. This is part of the infrastructure of running their business, so they value us giving them the policies and the controls to do that. And with the consumer versions of our products and the enterprise versions of our products or the professional versions of our products, we will be focusing on serving each of those customers and delighting them, and there may be different cadences or different ways in which we talk to those two customers. And so it’s 8.1 – there’s 8.1, there’s 8.1 Pro and they both came at the same time, that’s not clear to me that’s the right way to serve the consumer market, it may be the right way to continue serving the enterprise market.

Philip A. Winslow – Credit Suisse Securities LLC

So let's transition to Windows Phone. Actually one of your partners, Nokia in Q3 had good momentum in Windows Phone. It seems like some of that is picking up, where are we on Windows Phone and what do we need to see in Windows Phone to take that next step to bring the market share higher?

Terry Myerson

Windows Phone has got – it’s a product that – it's kind of like so many of –it’s done quite well in what I’ll call the opening segments actually. It's getting to – delivering a high quality experience in an opening segment really is a tremendous software project and a very important – it’s important hardware to get done as well. Like the place where excellent hardware engineering – sorry, excellent software engineering where someone can really focus on tuning the experience on a tight electrical bond is a place, where we've been able to differentiate, take share in double digits and outsell the iPhone in many markets. And the premium categories, the place where we’ve delivered some great innovation. I am very proud of the Lumia 1020 work, the work that was done on the camera with Nokia there and we’re exploring innovations like that with other partners now. The – but I think really our success of Windows Phone is going to be proportional to our success with Windows, I mean, as we – as Windows grows and becomes more vibrant and more important in people lives and the PC, then they will want a Windows Phone with it. And so to me, the most important thing for Windows Phone success is Windows success.

Philip A. Winslow – Credit Suisse Securities LLC

Now let’s just talk about – there is a little company you guys are buying called Nokia. And so – how – from a sort of platform perspective, you being the development guy, how does actually owning the hardware OEM change, I guess, the development process or the cadence that you can deliver a product?

Terry Myerson

For the Operating Systems Group, we are focused on being a platform provider to all of our ecosystem of partners. And so whether it’d be Dell, HP, you mentioned ASUS, Acer, Lenovo, these are all important partners that we will work with and the highest integrity way to deliver their innovations on our platform and to delight customers together with their devices. So that’s the most important thing from an Operating Systems Group perspective.

From a Microsoft perspective, having the company’s ability to innovate in hardware, I think is exciting for us to build and create new device category ourselves, to be able to deliver. In some ways, Microsoft being able to deliver a premium experience that is a pure expression of what Microsoft thinks a device should be does allow us to also at the same time enable our OEM partners to differentiate and let their devices be what they would want them to be. And so it’s – I think this is very exciting for Microsoft, the same way as having Microsoft Store, having Microsoft devices allows – gives us the confidence to let other partners go free and do their own thing. And so, I think it’s just very exciting for Microsoft and then as a platform group, we love all of our partners.

Philip A. Winslow – Credit Suisse Securities LLC

So let’s switch gears to the Xbox now. I wonder if you could talk about the Xbox One launch and sort of how you are approaching this versus 360, especially sort of just with the context of sort of this total platform perspective?

Terry Myerson

I thought you were like an enterprise software…

Philip A. Winslow – Credit Suisse Securities LLC

I know, we are mixing it up now. Eventually, I’ll get to the enterprise stuff.

Terry Myerson

I mean, the living room is important – it’s a key part of all of our lives and the PC is a part of our life from 9 to 5. Xbox in our living rooms and our homes is part of our lives, I guess, from 5 to 9 that and we do more with our families in our living room than play games and shoot aliens and the – and so having the ability to innovate and delight customers in that living room is just an important opportunity for us.

Philip A. Winslow – Credit Suisse Securities LLC

And then, I guess, how do you tie this into sort of the Xbox into that – sort of that total platform strategy across all devices? Where does Xbox fit into this, because sometimes I get the question it’s like why do you even need Xbox? Is it part of the platform ecosystem?

Terry Myerson

I don’t think there’s any part of our – what we do, we’re one person both at home and at work. We do work at home. Who we are as a person doesn't stop when we go to work, and so being able to provide a platform that people enjoy using throughout their lives is just critical. So the entertainment assets we have developed through Xbox will differentiate our PCs, phones and tablets. The cloud services we built up through Office 365 and Windows Live will help differentiate things we do in the living room, so it really does all work together synergistically. We do have the – a core Xbox audience that’s young men that is different than perhaps the sort of the core audience of a Windows PC right now. We do have these two brand; Xbox and Windows and so, sometimes those two different assets can make the conversation more complex. But fundamentally, it’s a notion that people want a device that can serve both their life in a work and play mode. I think that applies to every device category and it applies to more than just Xbox. I mean, Xbox is a device and a brand, but that’s sort of under appreciates what that product is and what it means to Microsoft.

Philip A. Winslow – Credit Suisse Securities LLC

All right, let's go back to Windows, now that we touched on Phone and Xbox, but one of the things that people look at often is just the size of the application ecosystem tied to a platform for the success. How many in the app stores that are – I mean, how do we think about where you guys stand right now with Windows 8 in particular and then also Windows Phone? And then what are the goals or the milestones you want to see and just say, okay, look, this business being accepted by the application developer community, it is a vibrant ecosystem?

Terry Myerson

Well, Windows 8 runs over a 1 million Windows Desktop applications today and so we started with a notion of people are buying these Windows PCs, they are happy with these Windows PCs, because it runs some many of the things they expect to run on a Windows PC. Then we have the new applications that people are writing and there I think we have not done the work to aggregate the scale of Microsoft well. and that’s to me, the biggest opportunity with this new operating system is to bring all of our devices together, so that users can target all of them and that’s just tremendous opportunity there for us to do good work, to enable our developers to do good work and it’s jut a big focus.

Philip A. Winslow – Credit Suisse Securities LLC

Got it. And then I’m going to ask one more question and then I’m going to open up to the audience and then I’ve got a few more here, if there are no questions from the audience. but one of things that resonated from what you are saying here is that enterprise and consumer, that’s a question I get a lot about Microsoft is – can any company sort of effectively do both in one platform? So how do you respond to that?

Terry Myerson

Well, I think the answer is yes.

Philip A. Winslow – Credit Suisse Securities LLC

Hopefully, and then why is the next question?

Terry Myerson

Well, I mean, as I just think about, it’s not – it’s what the customer demand – as you look at what the customer is asking for from their products. What I want my products, I want a – there’s going to be a set of devices in my life. I’m going to have a phone, I’m going to have a tablet, I’m going to have a PC, I’m going to have a TV, I’m going to have other devices and I’m going to use these devices as one person and I’m going to use those devices during my day at work and I’m going to use those devices when I’m at home. and so we get focused on what’s the – we listen to customers, we respond – what they want, we focus on the differentiation we can bring to customers on each of those devices and this is what customers are looking for, what they need and so this is what we’re going to do.

Philip A. Winslow – Credit Suisse Securities LLC

Got it. I’ll pause for a moment. I think there’s a question up here in the front, but also just raise your hand. So one in the front and then if we could also get a microphone in the back there ready for the second question.

Question-and-Answer Session

Unidentified Analyst

Terry, good morning. Thanks, Phil. A couple of two questions. One has to do with the number of new devices that you were talking with the Dell device, two in ones, tablets coming. What is exactly the consumer value proposition? There are a lot of price points coming out. There are a lot of devices coming out. I walked into Best Buy, walked through and said wow, there’s a lot. but I didn’t really, nothing – it was more confusion than it was clarity.

So what exactly is the consumer value proposition of these new devices and how are you communicating that? Because if it’s all hinged upon Windows, as a consumer, there’s not a lot on Windows that I really want to do on a smaller device that’s a mobile device. So I just wanted to ask that to get I guess overall the context. So basically, it’s – what’s the value proposition on these new devices and why should Windows 8 or Windows mobile – sorry, why should Windows mobile really be predicated on success with Windows, because I feel like they are different experiences?

Terry Myerson

Well, there’s a couple questions in there. Who are our customers, I mean our customers, who are the people that feel affinity to the Windows brand, who are the people that are – that feel trust and kindness [ph] there’s a billion people or more that feel trust and affinity with the windows brand. windows helps them in their lives to be more productive and that’s the anchor, we’re talking about – we’re not talking about embedded industrial devices now, we’re talking about the consumers. So that you start there and say that is, those are the people that we start with in terms of offering them new device categories. I think we talked about Xbox a few minutes ago. One of the reasons I’m so excited about the Xbox platform being part of Microsoft is, it does bring tremendous entertainment assets, has allowed tremendous entertainment assets to develop within the company. and so I think we not only do some good work to leverage all those entertainment assets across more screens, but it will be a critical part of our strategy in terms of differentiating us across all device categories.

And so it’s not so much that a Windows laptop is – will be used with – at the same time, with every Windows Phone. it’s a notion that you do start as you move into new adjacent markets or new adjacent device categories, you are going to look at and say who are your current customers today and how can we extend our delight of those customers or extend our business with those customers. And the phones is a different market than tablets, but I do think that the individual that uses a laptop is also interested in a phone, the individual that uses a tablet is also interested in a PC and that’s the – and so that the thesis about it all working together as one device family.

Philip A. Winslow – Credit Suisse Securities LLC

What is that – as a consumer, just what exactly is that value proposition that’s going to push me again, what I have in Windows, what I have with my PC is what I’ve had for a while, I’ve had in a work environment. It was my introduction to computing, but it seems like the market is going past that. how do you get that thought – how do you get the consumers back into Windows? What’s the value proposition you are trying to create in the cloud before the consumer that's going to draw them? when you made the comment that Windows should be the driver for Windows mobile that confused me, because it’s a little bit backward looking from how I see it or maybe, I don’t understand the vision.

Terry Myerson

I think it’s – I start with the customer base of Windows is that we’re Microsoft, we’re not – we’ve built off of what the great technology assets and customer base that we have today to delight the customers we have more in new ways and serve them in more parts of their lives. And so that is the core of the strategy of what we do.

Philip A. Winslow – Credit Suisse Securities LLC

Just a question on, I guess there are some people that believe that Windows, the Operating System business, Windows in particular, is bloated and operating expense should be cut drastically and that the days of selling an Operating System in the mobile phone space or the tablet space are just over, because that’s been obviated by your competitors.

So how do you respond to that, number one, and number two, and that that could be a particularly large source of cost savings for Microsoft. And number two, given the new structure of the organization, how possible is it to actually just take down the investment in consumer operating systems and for building Operating Systems for consumers that you plan to actually sell for a license? Thanks.

Terry Myerson

So we invest in the operating – I think you have to separate the investments that we make in terms of the experience we want to deliver for both consumer and enterprises from that – separate out the financials to that. There is a level of – there’s innovations we can deliver and customer delight we can deliver, when we’re investing in the whole stack from the Operating System through the applications to the cloud. And so the – everything, we do pivots off of delighting the customers, satisfying the customers, delivering new value propositions to the customers. So we can maximize that customer impact when we – when we are working with a customer at all layers of the stack. That you start with that notion. If all you’re doing is investing in one layer of the stack, you are constrained in what you can do for the customer.

Now in terms of how we allocate our R&D resources or partition them across different layers of the stack, I mean that’s allocation decision that Steve has made over time and certainly, bringing things together in the way they are now gives us a new – different form of transparency on how we’re allocating resources.

So it’s always a discussion we’re having about, deliver the highest return from our investment, but the – from an innovation or customer delight perspective, I think everyone involved can point to – but to take our enterprise customers, the ability to invest in security and management at the steepest layers of the stack does differentiate us today with many, many customers. Does monetization change over time and how we delight that – when we delight that customer in that way, I don’t know. but you got to start with the innovation thesis, you got to start with the highly satisfying differentiation, how you differentiate to the customer and the Operating System that Microsoft delivers today is fundamental to all that differentiation we deliver whether it is at a productivity desktop in the enterprise or a game console in the living room. I think there is a question. Go ahead.

Philip A. Winslow – Credit Suisse Securities LLC

Just I know we’re running out of time. So just one quick question was Apple recently introduced its Operating System and all of its updates are going to be free. How does that change your pricing strategy with your – with the Microsoft in the future?

Terry Myerson

Well, what Apple – as I understand Apple’s announcement, they announced that its upgrades to already a purchased Apple product of the Operating System would be free. Windows 8.1 is a free upgrade to Windows 8. And so well, I did not say Windows update or I did not say Windows will be free. We’re…

Philip A. Winslow – Credit Suisse Securities LLC

[Indiscernible]

Terry Myerson

I said Windows 8.1 is a free upgrade to Windows 8.

Philip A. Winslow – Credit Suisse Securities LLC

[Indiscernible]

Terry Myerson

And it’s just something that not to be too repetitive, but satisfying our – delighting our customers and aggregating the scale of our platform is a big focus.

Philip A. Winslow – Credit Suisse Securities LLC

There’s time for a couple more questions if they are some from the audience still. I think one here.

Unidentified Analyst

So you’ve got a pretty diverse set of responsibilities. Can you just talk about what your financial incentives are?

Terry Myerson

Personally?

Unidentified Analyst

Yeah.

Terry Myerson

We’re getting good. I think the company publishes – I’m not an Executive Officer of Microsoft. So I think the – what the company publishes is what they publish.

Unidentified Analyst

So just broadly, I mean, the question, it’s really interesting to delight customers with the Xbox and things like that, but I mean, are you – how do you think about revenue and profit, there has been a lot of questions about that and it will be great if you guys could be dominant in Windows Phone. but the reality is, it’s a fraction of what the opportunity is in business operating system. So how do you think about again, kind of devoting your resources relative to what the profit pools are?

Terry Myerson

Well, there’s three dimensions of what we focus on and they really – there is customer satisfaction scale and the financial mix, the financial return and they really do, the three of these things do work synergistically together over the long-term. The more customer satisfaction we drive that does help drive scale and scale helps drive longevity platform and our opportunity to get value from our customers.

And so we really focus on all three and in this audience, it seems completely reasonable to me that the folks who want to be on the financial return. but certainly, in terms of leading the Operating Systems for Microsoft, all three have to be top of mind at all times – customer satisfaction, scale and financial return. and in the enterprise space, we get value differently than in the consumer space and there’s different macro trends going on in each, but – and customer satisfaction is looked at differently in each. but focus on all three of those dimensions. My team – my leadership team, our discussions with the Microsoft leadership team, we really do look at customer satisfaction, scale and the financial return.

Philip A. Winslow – Credit Suisse Securities LLC

We use the safe word mistletoe on your pay plan. You won’t have to answer that.

Terry Myerson

Okay.

Philip A. Winslow – Credit Suisse Securities LLC

In the – actually one last question for me as we just have a couple minutes left here. But obviously, you have been tremendously successful with Windows 7; 75% of enterprises are now – the last time you reported on Windows 7. You’ve got the end of life of XP coming up in just a few months. One of the questions I get is how does the success of Windows 7 and enterprise impact the eventual adoption or not of Windows 8 in the enterprise?

Terry Myerson

The large enterprise deployment take place in waves and the Windows 7 deployments that are completing now, started a little while ago and we’re having frankly, some great discussions right now about enterprises moving to Windows 8 or 8.1 and adopting the benefits of Windows 8.1 and the – years from now, we’ll be sitting on the stage hopefully talking about the deployments, the great deployments of Windows 8 point something, one, 8.2, I don’t know, I’m not announcing a product release. But I mean through enterprise deployments or this gets back to the enterprise versus the consumer question. Consumers are in this place where they expect the software to just upgrade itself. enterprises are not in that place. enterprises want to think about these deployments as mission-critical infrastructure that they want to manage the rate of churn of and that is a way of doing business that we embrace and support for enterprise customers.

Philip A. Winslow – Credit Suisse Securities LLC

Perfect. Well, we’re at the mark. So I appreciate your time, Terry, coming down. like I said before, its executives like yourself that make this conference special. so thank you for coming down.

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