MARK MOERDLER: Good morning. My name is Mark Moerdler. I apologize for my voice. I’ve been just trying to get it back over the last couple of days and talking a lot, so I apologize for it in advance.
So it’s my great pleasure to welcome Kevin Turner, Chief Operating Officer of Microsoft. As Chief Operating Officer, Mr. Turner is responsible for the strategic and operational leadership of Microsoft’s worldwide sales organization, including consumer channels, marketing and services organization, online advertising, sales organization, corporate support organization, and even relating to sales, anything related indirectly or directly to it, as well as corporate operations and internal information and technology.
Microsoft asked that I read quickly the following Safe Harbor statement. 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 their current expectations and assumptions that are subject to risk and uncertainty. Actual results could materially differ because of factors discussed in Microsoft’s earnings press releases and the comments made during the presentation as well as the risk factors listed in the Microsoft SEC filings. Microsoft does not undertake any duty to update any forward-looking statements.
And with that it is my distinct pleasure to ask Kevin to come up and share a couple of words. By the way, on your seat you’re going to find white cards. If you have questions, please write them on the cards, people will pick them up and hand them up to us. Thank you.
KEVIN TURNER: Thanks, Mark. I appreciate it.
MARK MOERDLER: My pleasure.
KEVIN TURNER: Well, good morning. Good morning. (Audience response.) There we go. It’s great to be here, and it’s great to be able to talk a little bit about the Microsoft story and what we’re up to, which I think is very timely.
We’ve got a lot happening in our company. There’s a lot happening, certainly, in the industry. And being someone that’s been in technology and around technology for a very long time, I think this is one of the most exciting times, certainly, that I’ve ever seen as it relates to the amount of change, the velocity of change, and the volume of change. So there’s a lot to get to, and a lot to talk about, and I’m going to jump into it.
Before I do that, I want to say thank you to Mark and thank you to all of you for allowing us the opportunity to come here. We appreciate the opportunity to be able to bring you up to speed a on our business and talk a little bit about context, as well as hear any questions or feedback you may have for us.
The company is a little over 37 years old, and in tech terms that’s an old company in some respects. In other respects, we’re a very young company. And we have always been at our core a software company. Bill believed in the magic of software, and the possibilities of software. And we’ve long had this aspiration that he crafted of having a PC on every desk and in every home, and that dream and aspiration mostly has been fulfilled, particularly in mature markets. In emerging markets it’s happening very rapidly.
The transition that we’re on right now and the transformation that we’re in the middle of is around this idea of becoming a devices and services company. It doesn’t mean we’re going to make all the devices, but it does mean the way we monetize what’s important to us changes from a device perspective. It also means that we will make some of the devices, that we’re getting into some of the devices areas. And you saw us launch Surface and Surface Pro. We’ve long had Xbox, and we’ve long had mice and keyboard, and some other hardware elements. But you saw us take a different stance, particularly of late, as it relates to devices and where we’re going. And it’s a broad range of devices that we want to light up, still having software at the core, great experiences across those devices.
And to be able to do that we believe services is one of the big monetization levels and levers that we will use across consumers and businesses. And we’ve been hard at work for a long, long time, candidly, on our services business. I wouldn’t say we’ve been out and evangelized, and articulated what that story is from a services perspective, but I’m here today, at least from the perspective of the enterprise really grounds you in what’s going on in the services business at Microsoft and where are we, because I think this has been about, I would say, more than seven to eight years in the making, and it’s really maturing in a very nice way. And I’ll talk about that and get into that in a moment.
We have a very diverse and balanced business. This is not a chart you see from us very often, but it’s a chart that I like to use, I like to use for a couple of reasons. One, we’re really the only technology company out there seeking end users and consumers all the way up to the biggest customers and governments in the world. And that’s something, as you see this chart here, 53 percent of our business goes to enterprise, 21 percent consumer and online, and then we have an OEM number, which certainly there’s a lot of consumer in that particular segment as well, but that’s how we account for it. And then small and medium-sized businesses at 6 percent.
The other thing you can see here is from a product and services perspective. And any time I talk about this it blows people away. This chart used to look, a long, long time ago it was predominantly Windows, then Office, then everything else. As you can see from this particular chart, Windows is now our third biggest business. And we have a couple of other businesses ahead of Windows and I would say that we’re pretty proud of the diversity of this portfolio. The Office division is not just the Office product. In fact, the last three record holders in our company, in terms of speed to a $1 billion from a product perspective, live in this particular segment of the chart, Office, Exchange, SharePoint, Office 365. There are some very big complementary products in that particular segment.
The Server and Tools business continues to explode and we continue to grow share. You all see the share numbers. We’re growing share across virtualization, hypervisors, systems management, database. Those areas, very, very healthy now make up 26 percent of our company and continue to grow very nicely.
Windows is still 25 percent, Entertainment and Devices at 13, and Bing and the online area at 4. And if you look at the geographic basis, we count it the way we count it is really North America, the U.S. and Canada together, as well as rest of world. And I would tell you that this chart continues to change and will continue to be more balanced from a global perspective, but the business is very, very balanced and diverse. We operate in 191 countries around the world. And we have over a billion and a half people that use our products every day. So it’s a very global company from that perspective.
But, whether you slice it on customers, products and services, or geographically, we believe we have a very balanced business which positions us well both in good times and tough times.
Now, if I would have been here at this conference a year ago on this day I would have said, ladies and gentlemen, we’re right on the eve of the largest single innovation plan, portfolio, roll-out, reimagination in the history of our company. We basically are about to launch every single product, solution, and service in our portfolio in a 12-month window. I stand here today to tell you we did that. And it feels really, really good. And so we launched and landed in market an unprecedented wave of innovation this past 12 months and something that we’re going to continue to build on for the years to come and it’s been very, very foundational for us as an organization.
Now when you think about the opportunity we have in the marketplace we really see four market-driven trends that I want to talk about and then I want to talk about how we’re answering those. And my specific pivot today will be around how we’re answering those in our commercial business, particularly with the enterprise and business-to-business. Cloud social mobility and big data, there are no surprises there. Those are very, very popular business themes that customers are all seeking answers to, that our partner ecosystem is also seeking an answer to. And that’s what we’ve been hard at work on, as it relates to really ginning up our business and our go-to-markets to take advantage of those.
Let me jump into the cloud first. When you look at the Microsoft cloud I think the first thing you have to do is you have to have context that we’ve been in the cloud a long time. And we’ve been in the cloud specifically around consumer services for a long time. And if you look at some of the momentum we have today with 400-plus million people using Outlook.com, formerly named Hotmail, 46 million people subscribing to Xbox Live, 460 million MSN customers that use the product on a regular basis. Skype has over 300 million active users that average 100 minutes a month. And now one-third of all long-distance traffic in the world, internationally, runs through this particular network. SkyDrive, a relatively new and younger cloud service for us now has over 250 million users growing very, very rapidly. The strength that we have in these consumer cloud services are serving us extremely well in our commercial cloud services and that’s what I’m going to pivot to.
If you look at our commercial cloud service business, the fastest growing product in the history of Microsoft to $1 billion, first was Windows, second was Office, third came SharePoint, and I’ll talk about SharePoint in a moment. But, this year that we’re in Office 365 became the fastest growing product in the history of Microsoft to $1 billion. We’re growing our seats five times what we were year-over-year. And this is a business that is exploding and accelerating across all segments and it’s one that we feel very, very good about. We’ve also been very active and hard at work in signing up some of the most important and sophisticated customers around the world and that is governments.
And we’ve got a lot of government momentum, including here in the U.S., but going outside the U.S., into Canada, India, Australia, the U.K., France, Germany, Switzerland, and Mexico. We’ve got some very big lighthouse wins that we’re winning in governments and taking that to business in a very strategic way. We feel like when you see our cloud solutions, that we’ve got the most enterprise-grade, and enterprise credible cloud out there, specifically around productivity. And 50 percent of the Fortune 500 are already actively using our platform and infrastructure as a service with Azure. So we’ve got some real momentum that is manifesting itself into real numbers in the business cloud space and it’s one that, again, we feel pretty good about.
Let me take you through some detail here about what are you doing in the business cloud services? What do you offer the enterprise customer? What are they buying? Because I think this is really important for you to have context around. We have three distinct types of clouds. We have a private cloud environment and that includes hosted, hosted by a partner. And it also includes customer hosted. So we have a great private cloud environment. We have a public cloud environment with our own cloud, and specifically Windows Azure, where we run the majority of everything we have in our public cloud on Azure.
And then we have probably the most popular cloud that we offer is the hybrid cloud. It makes a very unique story about our cloud situation and other people. We’re not trying to push people to our cloud. We’re trying to build the cloud on customer terms. We go we take customers to the cloud at their pace. And so we offer both, behind the firewall and outside the firewall cloud environments. And when you think about it, let me talk about private cloud for a moment, because this is an area, again, that’s really changed over the last three years. We got a little bit of a late start as it relates to virtualization. We’re now at a situation where we’re at very, very strong market share. We’re growing every quarter. And the dominant guy is losing every quarter, as it relates to virtualization. And the game all changed when we launched Windows Server 2012.
When we put Windows Server 2012 in market we have a superior piece of technology all across the technology measurements and metrics that people check. And we’re a third the price of the other guy. So the share momentum that we have in this private cloud space is all driven off of a better product, and a better price. When you get a better product and a better price, I’d tell our own team, you’d better grow share. And that’s precisely what we’ve been doing quarter after quarter, after quarter, in this particular space and we’re growing at twice the rate of the other guy and as I said, every quarter as the share numbers come out, we go up, they go down. And that’s something that, again, we like to see from a market share perspective.
When you look at the public cloud environment, you have to think about it in terms of three different distinct types of services that we offer. One is productivity and collaboration. I talked about the success of Office 365. Yammer, Skype, SharePoint, Lync, and Exchange, also fall in that particular space. So we’ve got a unified communications cloud, a collaboration cloud, a productivity cloud, and the ability to host those services publicly, or privately for people as they so choose.
In the business solution area and our Dynamics platform, again, we have both on-premise as well as CRM Online and ERP Online, something we’re very excited about for our Dynamics portfolio. In the infrastructure and platform as a service, it’s all about Azure, Windows Azure and SQL Azure. And we started with a really forward-looking transformational approach, as it relates to platform as a service. We really stepped out there and took that platform as a service head on, and delivered that with Azure. Then we came back recently and added our infrastructure as a service. So the most forward looking of all of the clouds that we have is Azure, from a platform as a service perspective, and we have some very big customer wins and important customer wins in that space that we’re also very proud of.
One of the strategic advantages we have in our portfolio is the ability to have common identity, the virtualization, common management, as well as a common development environment.
If a customer has Active Directory and System Center completely deployed, we have the ability to take them to the cloud whenever they so choose, and the ability to have that done where they can have a single sign on to sign in, and they don’t care whether the data is hosted in the public cloud, the private cloud, or the hybrid cloud. They have unique provisioning and identity management with our platform and with our solutions.
And think about it, the majority of our customers have Active Directory and System Center. So we have a really powerful flywheel, if you will, to continue to gain momentum in the enterprise cloud space. And we think we’re very well positioned. This is not a three-year roadmap. This is what I’m selling today in market. This is what’s driving our enterprise business in a big way.
Now the Microsoft enterprise grade cloud, we’ve spent a long time working very hard on making sure that we really put the investments in building this cloud out the right way. We’ve got globally redundant data centers in all the important geographic theaters around the world. We have both secondaries and primaries. We’ve got massive networks built to work on latency in places like Australia and South Africa, and other hard to get to places.
We’ve got a whole bunch of advancing compliance and regulatory initiatives underway. This is one of the hardest areas because the compliance and regulatory environment from a cloud service perspective changes very, very rapidly, and it’s different by geography around the world. Even within Europe, yes, they have the EU Model Clause, but even within Europe the different countries have different requirements as it relates to data sovereignty, data protection, data privacy, and what we do with the cloud.
One of the things that I’m most proud of here is we just launched last week a cloud in China. We have the first commercial an enterprise grade cloud, and we have a partner there in China that we just launched and kicked off last week. And we’re very excited about the potential in China for a lot of reasons. One for monetization reasons. There’s no piracy in the cloud. The cloud is a beautiful thing from that perspective.
The other thing that the cloud does is it allows people to stay current. One of our biggest problems is a lot of people have our products, solutions and services, but they’re running old versions. In the cloud we take care of that for them.
The third thing the cloud does is when you sell in the cloud, you now have someone’s mission critical environment that you’re taking care of and looking after. So it gives you, what we’ve seen is it gives you a unique perspective to be able to grow your share of wallet with that customer.
Microsoft still has a relatively low share of wallet on enterprise spend because we’re software, not hardware, in the enterprise. And when you think about our potential to grow that share of wallet, we see it coming from the reliance on cloud services. Getting people on our cloud services is great for us on being able to keep them current, keep them patched, allow them to experience the latest and greatest functionality, all the different things that go along with that.
I’ll talk about security in a moment, but it’s an important area and growing of importance for everybody globally. And those companies not working on it should be. That’s how strongly we feel about it. And we know that the cloud saves people money. The ability not to have to procure data center space run power, run fiber, get here, bring it up, all those things are now put on somebody who has scale. And certainly from a Microsoft data center perspective, we have a lot of scale.
I get asked a lot about security. And, again, I’m somebody who has been in IT and around IT for a very long time. One of the things that I like to do each year is I look at this report that’s a third party report that’s put out by a company called Secunia. You can look it up online. One of the unique things about this report, and I study it every year, is it tracks the number of vulnerabilities that are out in the marketplace from the top software and technology firms. This past year, the non-Microsoft vulnerabilities accounted for 86 percent of the vulnerabilities in the most popular programs.
When you look at that that’s a chart that’s really changed over the years. And one of the things that I think is pretty cool when you think about it is this idea of having the top companies and their vulnerabilities. If you look at this past year, the last 12 months, which company would you say had the most vulnerabilities? Well, it was Google. Who had the second most? It’s Apple. Who had the third most? It’s Adobe. Then it’s Mozilla, and then it’s Microsoft.
This is a chart, ladies and gentlemen, that’s quite profound and interesting on a couple of dimensions. One, our global footprint relative to the other four guys is significantly larger if you added all of them up by a multiple. So we have a lot bigger market share, and a lot more potential chance for exposure than the other guys. The reality is we had fewer vulnerabilities than the other guys.
Now this is no accident or mistake. We’ve been investing in security and the importance of trustworthy computing for many, many years, more than 13 years. As an organization, we’ve been investing in that initiative. Part of that you could say is out of necessity. Whatever it is, we’ve got a big head start in this particular space, land we only see the cyber security areas continuing to escalate, continuing to elevate as it relates to the importance of what’s happening out there.
We’re not satisfied or happy with 131 vulnerabilities over the last 12 months. Precisely the opposite, we want to drive that number down further and further and further. But we’re really the only company out there doing that. Everybody else is going the other way, and we’re continuing to go the other way. And we’re going to continue to go in opposite directions on that, and invest in what we think is a very, very important area.
Now the other area about the cloud that we got asked a lot about is what about Office, what’s going to happen to Office as it relates to this cloud and where things go there? Well, the new release of Office is a cloud service. It’s got the full Office apps available in the cloud and offline. It’s always up to date as it relates to the cloud with features and what we’re able to drive there from a product and product performance standpoint. And it allows you to sign in to any device and your documents, your spreadsheets, your Word documents, your OneNote can roam with you regardless of what device you use. It’s per user now across Windows tablets, PCs and Macs. And that ability to see the side-by-side installation of the old version and the new version we think has been very, very helpful in helping this product get embraced. And so we’re pretty excited about this new Office and where we’ve gone as a cloud service. And it’s been very well received by our customers.
Let me talk about the next big mega-trend that we’re embracing and it’s social. And it’s specifically enterprise social. Now you know the success of SharePoint. It was the fastest growing product in the history of the company to a billion dollars after Office. And we’ve had wild success with SharePoint the product. It became the Facebook, if you will, of the enterprise. In fact, over 85 percent of the companies of the Fortune 500 use it, and more than that use it in the Fortune 2000.
When you look at where we’ve taken that particular platform, we’ve broadened it. And this new release of SharePoint is an exciting one, and I’ll touch on that in a moment. We bought a company a while back called Yammer, which has very good penetration, again, allowing for collaboration, group feeds, and technology and information sharing in the Yammer product. And we like where we’re pretty well positioned in this space. And if you look at what’s happened, we’re seeing great increases in the Yammer product and portfolio, and those continue to sustain and accelerate as we integrate that product into SharePoint and into our collaboration and productivity story.
We’ve got strong penetration with our unified communications solution called Lync. Yesterday we announced something very strategic in this space. We announced Lync to Skype integration, so the ability to do presence, sharing, voice calls from Lync to Skype, Skype to Lync, B to C, C to B communications exists now on the platform. Very, very strategic for us, again, from a social and collaboration perspective.
When you think about it, this enterprise social space is a hot space. It was really born of the idea that most enterprises want to get people to work better together behind the firewall. And that’s why SharePoint was so wildly successful. The new version, the contemporary version of enterprise social says, hey, that’s important, but I also want to make sure I collaborate and work well outside the firewall. I want to extend deeper into my customers and into my partners.
The new release of SharePoint does something very unique. Within that release of SharePoint that we just launched, we now have hooks built in for Facebook integration, Twitter, LinkedIn. The ability for a company to take those external data feeds, run those through the system using our CRM product, using all of our collaboration tools, SharePoint, the new release of Office, the new release of Exchange, and what we do with Lync and Skype, and bring a whole new powerful experience on enterprise social to the table.
This is a hot area. This is an area that most every company will give you a seat at the table to understand how can you help me get in front of this social phenomenon that’s happening to companies, everybody wants to connect outside the firewall now in addition to inside the firewall. And we believe with these latest and greatest solutions and the integration of Yammer, we’ve got a very, very uniquely positioned product to take advantage of that. So I look for this business to be of growing importance long-term, and we’re going to drive that very hard in our commercial business.
Next let me talk about mobility. There’s no secret, it’s a mobile first world that we’re moving to around. We’ve been hard at work on the mobile story. And we’ve still got a lot of work to do to continue to grow our mobile business. But one of the things we’re proud of is we’re making traction. We’re making traction in the mobile space. It starts with the quality of the OS. For the first time in external surveys, this one was done by PC Magazine recently, we’re now ranking ahead of iOS. We’ve been ahead of Android for a while. We’re now ahead of iOS as it relates to customer satisfaction and reader’s choice. That’s never happened on our platform before. It’s happening now. And so we feel very good about Windows Phone 8 and what we’ve been able to do there.
As a result of that, we’re seeing some market pickup. We’re growing at five times the smart phone market rate right now globally, five times, and we’ve become the number three phone OS. We still have a long, long way to go in this space, but we’re seeing positive momentum, positive traction. We’ve got countries like Mexico, Italy, Poland, Spain and others, Portugal, where we have really big share in these countries with the phone OS. And we’re going to continue to bring that out more and more globally. And, again, continue to grow share in this space.
When you think about the mobile ecosystem for Microsoft, though, it’s broader than just phone. The new Windows 8 platform gives us the opportunity with our technology to really explode the mobile ecosystem into new form factors, into detachables, into wearables, into convertibles, into two-in-ones, into all kind of tablets, slates, embedded devices, point of sale registers, ATM machines, kiosks. We’re bringing this particular OS and what we’re ale to do uniquely across this entire ecosystem and spectrum. And we’ve got some pretty unique technologies, like Smart Glass, which now offer the ability for you to watch a movie on any device, on your phone, pause it, resume it on your tablet or your slate from the same location, pause it, and resume it and finish watching it from the same location on your TV all with consistent motions across our platform. And that’s something, again, this mobile ecosystem is something that we’re nurturing. To continue to grow we see it as a very, very important area for us to continue to invest in.
One area that we continue to work on is this area of mobile and office, and productivity across the mobile devices. We not only have the best productivity experience on the Windows mobile platform, we now offer it available through web apps on iOS and Android as well. And so the ability for them to get those web apps on those platforms is something that we’re pretty excited about, again, with this new release of Office. We offer the same fidelity viewing and editing capabilities in the cloud across all platforms, and it’s something that we’re going to continue to nurture as well.
The second area that we’re really helping enterprise is in the area of management. Every company is struggling with how do I get my arms around this bring your own device to work, all these new different devices showing up in the workplace. The new release of System Center not only manages our devices, it also helps you manage the other guys’ devices. We now manage iOS and Android devices as well on our systems management platform. Again, this is something that enterprises are really seeking and looking for us to help them explore and drive that particular trend.
Another trend is big data. No secret with the cloud, with mobile devices, and smart devices, with the proliferation of social there’s a big, big demand on big data, big data, BI, analytics. What’s the Microsoft position in this particular space? Well, let me give you a couple of notes that you may not know about our platform. Our SQL Premium offering is growing at over 20 percent. And that’s a consistent growth rate that we’re continuing to drive on that platform. We lead benchmarks like TPCE now. We’re being able to get energy and efficiency and effectiveness from a database. We’re at the top of those TPCE benchmarks.
SQL is growing double digits all up from a revenue growth perspective in the last quarter, and that’s been a consistent trend for us. Excel certainly is the most widely used BI tool and will continue to be. We don’t see that changing in the foreseeable future. And SQL Server is now the most widely deployed database in the world by far. So when you look at all the databases out there, the number one deployed database in the world is now SQL Server. We’ve been growing share in that SQL business quarter after quarter after quarter. Why? Because we have a really good product, and we have a better value proposition. When you bring those two things to the market, you can grow market share, and that’s precisely what we’ve been doing in this enterprise space.
Now, when you think about big data, what’s the Microsoft approach? And that’s pretty simple. We have this idea that there’s massive amounts of data that are just being created. We want to help companies take that data, turn it into information, take the information, turn it into knowledge, and more importantly turn the knowledge and turn it into decisions. And it’s all about having access and being able to drive that across devices, being able to have powerful, engaging tools that people are familiar with, and being able to connect across your entire platform across structured and unstructured data is a very important part of big data and analytics.
Now when you think about our offerings specifically, we have a couple of things that we drive. Number one, we want to drive insights through this integration with Excel and Hadoop. We’ve made a big bet on Hadoop, and being able to be completely aligned with Apache gives us a unique position in this area of BI and big data and analytics. And we now have a Hadoop on Windows from Horton Works, and we also have the ability to manage and spin up Hadoop clusters on Windows Azure now. And the ability to make that seamless and easy for customers is something we’ve worked hard on this past year.
We have a SQL Server 2012 Parallel Data Warehouse SKU, and we also have an HD Insight Server SKU. But we’ve got a couple of SKUs for private cloud environments or behind the firewall environments that we can really spin up some nice, great, very friendly opportunities for people to really embrace big data and analytics in a very unobtrusive way.
And then certainly we’ve got great tools wrapped around Excel and SQL Server with HD Insight Service, and the ability to either put that on Azure or bring those services to the behind the firewall private cloud environment.
So we’ve got a really exciting big data story, again, all built around value and effectiveness. And that’s our strategy for continuing to grow share in that space. When we come in and compete with the other guys, it’s really about here’s the value we can bring you and here’s what we cost. And our value proposition and model is such that it’s very, very compelling for enterprises to continue to look at Microsoft for the enterprise in a different and unique way. And so we’re working hard on strengthening this position, our position in the enterprise.
And one of the things that I saw recently which I thought was pretty cool, was there was a survey that was put out by a third party recently. The question was, which IT mega-vendor will be critical and indispensable to your organization’s IT environment in the future? I like that word “indispensable,” it’s an interesting word. If you look at it, 2012 is really that what I would say green, 2013 is the dark blue. You can kind of see what happens there with some of the technology companies and where they’re going.
When you go through this list and you look at it, this is what enterprise customers are saying independently about the prospects of Microsoft in the enterprise, 45 percent in 2013 thought we would be indispensable to their organization’s IT environment going forward. And that is not a secret. That’s not a surprise. We’ve been hard at work on building and nurturing this enterprise business for a long, long time and that’s why that share, those share opportunities continue to resonate and show that.
Now, the cloud momentum we have is quite substantial, ladies and gentlemen. We have all I mean big companies around the world have had global rollouts of our cloud services and have been very happy on our cloud services. The acceleration and momentum we have in this space is one we’re going to continue to see. We continue to expect to see, and again, we’re right in the midst of transforming our company around that.
Now let me talk about Windows 8. Windows 8 was a very, very bold piece of innovation that we did this past year. And we could have done a lot of different things with Windows 8. We could have made our phone a big tablet. We probably could have done that and got it in market sooner than we did. The reality is, we chose a different point of view. We chose a point of view that says we need to reinvent an ecosystem. And I just want to highlight some of these changes that went into Windows 8 as a reminder for you.
Number one, it’s the very first time in the history of operating systems that a touch first, and touch-centric UI has been created. We did that with Windows 8. We landed a whole new client-side programming and app model, because we used to be completely limited to .NET. Now you can develop in the language of your choice on Windows, Java, C++, C# and .NET, as long as you use HTML 5 and our browser. We also said, let’s roll out a new app store. And we did that. We did it in 135 countries. We also said, let’s add support for ARM and System On A Chip, as well as Intel and x86. We did that. No other OS in the history runs across both. We’re the only one.
We also said, lets’ design and sell first-party hardware. We did that with Surface and Surface Pro. We anchored on the Microsoft account. So now when you sign into the Windows product, after you get to Windows 8, you have one sign on and your background, your images, your digital memories, your cloud, your data, your security, your preferences, your spreadsheet, your documents, your pictures, follow you regardless of the device. Now we also said, let’s redefine and transform our entire OEM ecosystem and our silicon ecosystem at the same time around touch. And that transformation is happening. We’d like it to happen faster, but it’s happening in real time.
We also said let’s inspire a whole new level of devices and creativity with the platform. That’s just now beginning. These new form factors for two-in-ones, for convertibles, for detachables, where it’s going from an embedded standpoint, is just now exploding. The design wins continue to come in and go up in this particular area. And we said, you know what, let’s listen and make sure that we take feedback. And we’ve done that. We’ve been analyzing the telemetry of Windows 8, and Windows 8.1, which will come out and there will be a big preview on that at the end of June, has a lot of the learnings included. And Windows 8.1 is not a service pack, ladies and gentlemen. It is an update that advances the vision of Windows 8, that includes new features and functionality to enhance the experience, while responding to customer feedback.
So we have all of the safety, all of the security, that enterprises love built into the OS, in addition to, for the very first time in our history, we now have a consistent user experience across the phone, the tablet, the slate, the laptop, the desktop, and the TV, with Xbox TV. And so the ability to bring that Live Tile UI is something we took a long-term approach on and it’s one that we feel very good about. But, make no mistake when you reinvent an entire and I didn’t say reinvigorate, I said reinvent, an entire ecosystem it’s going to take some traction. It’s going to take some determination, persistence, and time to be able to drive that and that’s what we’re working on.
The thing that I would share with you is that at Microsoft, and I’ve been there it will be eight years in August, and I’ve been really hard at work on the execution mechanisms of the company. We’ve been consistently working on our predictability, both from an innovation standpoint, and from an execution standpoint. And we’ve made tremendous progress on that. If you look at our numbers and you look at our share growth and where we’ve done, that track record speaks for itself and it’s one that we’re very proud of. We have a foundation where execution is strategic in Microsoft today. We have a foundation where innovation has been strategic and will continue to be going forward.
And one of the things that I think is really profound is if you look at our history and where we are as a company, this innovation that we had, and the last 12 months was a record amount of innovation. The next 12 months, ladies and gentlemen, is even bigger. We are, again, doubling down on innovation. There’s more products, more solutions, more services coming to market in the next 12 months, stuff I didn’t even get to today. So that innovation machine, that innovation execution, is just ramping up into this devices and services world in a big, big way and we feel very, very good about that position.
So with that I think I’d like to conclude, but let me conclude with a couple of remarks and then we’ll open it up for some questions. Number one, we’re in the midst of this journey to devices and services. We don’t think we’re in the last chapter. We’re not in the first chapter either. We’ve been on this journey a while. But, we still have a lot of work to do. We’ve got a lot of work to do in devices. We’ve got a lot of work to do in services. But, we’re a company that’s building that out in a thoughtful way as we reinvent the company around the strength of the enterprise, the value that we get from consumer, and bringing the best of both those worlds together to get the synergies is what makes Microsoft very unique.
With that I’d like to thank you again for the time and the opportunity. And we’ll open it up for questions.
MARK MOERDLER: So Kevin, since we have only a couple of minutes, I’ll give you a couple of quick questions, to fire them at you and see if we can get through this. So Adobe is making the transition to subscription. They started first via incenting and now they are no longer going to be selling a licensed version, this is the last version. Does Microsoft see that they can drive the move to subscription within Office simply by a function of incentives, or do you have to do more?
KEVIN TURNER: I think we’re going to continue to offer both. We see the opportunity for us to continue to drive the Office product, the standard way we always have, but there’s a bigger and bigger uptake of the services side. So I think you’ll see us continue to do both.
MARK MOERDLER: As you know, I’ve been bullish on Office 365 opportunity. As head of sales for Microsoft can you talk about the opportunity from the client’s point of view?
KEVIN TURNER: You bet. I think it gives clients a unique opportunity to save money, because it allows us to take a lot of the commodity IT, and the commodity overhead from them and pull it into our environment. It allows us to keep them current. It allows us to ensure that we don’t have any piracy and that they’re always licensed correct. It allows us to allow clients to take advantage of the latest and greatest technology and that’s what I think the cloud service offers.
MARK MOERDLER: How do you keep the client churn down?
KEVIN TURNER: You’ve got to earn their trust and do a great job for them, because they have so many choices today. The customers vote by what they buy. And there’s no there’s consortiums out there like the research board. We’ve gone up dramatically in our customer satisfaction levels, particularly in enterprises and accounts, by really deeply getting in there and earning the right to be their trusted advisor, and that’s what we’ve got to continue to do.
MARK MOERDLER: How much do you think the approaches you’re taking are going to effect the bringing down of piracy in emerging markets?
KEVIN TURNER: The quicker we ramp to cloud services the better we’ll be able to get in front of a lot of the piracy that exists in those markets. We also have other initiatives going on where we’re working with governments on the importance of IP, and a lot of those strategic initiatives. And we’re seeing some progress, but make no mistake that’s an uphill climb in emerging markets on piracy reduction.
MARK MOERDLER: Windows 8 has had a lukewarm reception. What’s your perspective on the performance? What can you do to stimulate that further?
KEVIN TURNER: I think we’ve got to keep listening to customers. I think 8.1 is a big step forward for us. I think the ecosystem has got to hurry. We need more touch devices. Where we have a touch device in market the customer satisfaction on that device, and that operating system, is the highest of any OS we’ve ever released. Where we have a non-touch device it’s not. And so the reality is the ecosystem has got to reinvent itself that includes Intel. We need Haswell, we need Broadwell, all their future chip architecture helps us and we’ve got to have great form factors and great devices coming from the OEMs.
MARK MOERDLER: And do you see ARM part of that plan going forward?
KEVIN TURNER: We’re going to strategically continue to invest in ARM. We like the ARM architecture for the battery life, for the thinness of the device. It allows us to continue to broaden as the phone becomes more popular. It helps us broaden our platform.
MARK MOERDLER: Office 365 and the cloud has been discussed for years. Why is now the time?
KEVIN TURNER: Momentum and scale. We have Coca-Cola worldwide, McDonald’s worldwide. We have big, big companies that have gone with us that are running the service at scale. And it’s great to see that service mature. It’s great to see the value that we can bring. And it lights up a whole new productivity experience. When I get somebody on our Office 365, I can take them to that enterprise social space, or that unified communications space with Lync and Skype, very seamlessly and elegantly. And I couldn’t do that before.
MARK MOERDLER: Excellent. What are your expectations for Xbox One?
KEVIN TURNER: Excited about Xbox One, it’s a whole new way and level of entertainment for us, particularly in the living room. We’re excited about the content deals that we’ve struck. We’re excited about the opportunities we have to continue to really take that living room entertainment experience across mobile, across the devices, and take that to a completely new level for Microsoft.
MARK MOERDLER: Beautiful. Two more and then I think we’re going to get pushed off the table here. The focus on Azure, how differentiated is the offering of Azure today from the competition? Why do you think you’re going to win there?
KEVIN TURNER: What we started with is platform as a service. We didn’t start with infrastructure as a service. Infrastructure as a service is a real commodity business. It’s an important area, but it’s not where we started. We started at the platform level, which is something the other guys don’t have. And so there’s a strategic advantage to having the platform as a service that complements the infrastructure as a service. That’s quite differentiated. We have common management. We have common tools. We have a common development environment. We’ve got a lot of reasons and assets on why we will win in that space. But, the realty is, we have a different point of view in that space than the other guys and while the commodity infrastructure as a service is important, it’s not the thing that we’re building our business around.
MARK MOERDLER: Beautiful. Last one, in your presentation you noted big data is a trend that Microsoft is well-positioned for. How do you compete against open source network?
KEVIN TURNER: We embraced Hadoop. We run those Hadoop clusters on our platform. And we think that’s a strategic way for us to embrace the open source element plus provide our unique intellectual property around it. I think that, again, is the Microsoft of today. It maybe wasn’t the Microsoft of 10 or 15 years ago, but today is a new day. We’ve embraced devices and services and big data.
MARK MOERDLER: I think I can squeeze one more in quickly. The Microsoft Surface has had limited distribution to date. We understand that corporate clients are not able yet to buy through the traditional channels. Where should we think about this going forward?
KEVIN TURNER: Stay tuned. It’s coming to more and more retail locations. It’s coming to more and more channels. And we’re building our supply chain. It’s a whole new area for us as a company, and it’s one that we’re being thoughtful on, but we’re bringing it out strategically and it will continue to go broader and broader.
MARK MOERDLER: Excellent. I very much appreciate it. Thank you for joining us.
KEVIN TURNER: Thanks for having me on, Mark.