Windows 7 Refresh Cycle Already Underway

Enterprise IT decision-makers who have been waiting to deploy Windows 7 until all the bugs are shaken out of the new operating system are already beginning to get off the fence, Tami Reller, CFO of Microsoft’s Windows and Windows Live division, told investors Wednesday.

Now it’s time for Microsoft’s (NASDAQ: MSFT) sales force to focus on having the upgrade “conversation” with big customers, said Reller, who is also a corporate vice president in the Windows division. Reller made her remarks as part of a presentation at the Bank of America Merrill Lynch U.S. Technology Conference in New York.

“About 40 percent of enterprises are already either in evaluations or pilots [of Windows 7],” Reller said. “In [Microsoft’s] third quarter, we started to see some real signs that customers are beginning the commercial refresh.”

Microsoft announced record sales and earnings in its third quarter of fiscal 2010, which ended March 31, largely fueled by sales of Windows 7 to consumers. At the time, Microsoftsaid 10 percent of all PCs in the world — a billion — were by then running Windows 7; the fastest pick up rate for any version of Windows ever. Most of those were copies sold to consumers re-installed on new PCs, but some were also credited to early adoption by corporate buyers. Research firm Gartner last week predicted that new PC sales in calendar 2010 will reach 376.6 million, a 22 percent jump from last year.

Additionally, Reller said pressure has been building among users, who have Windows 7 at home but are running older versions of Windows at work, to get the newer Windows 7 in the office. The fact that such a large number of enterprise shops are already starting the process to deploy Windows 7 breaks the chain of the typical Windows upgrade, in which most big businesses wait until the release of the first service pack before beginning evaluations and pilots.

That’s good news for Microsoft and for its PC OEMs. Microsoft has yet to announce when Service Pack 1 (SP1) for Windows 7 will arrive.

“There are about 400 million PCs in businesses out there and the average age is four and a half years old,” Reller said. A whopping 85 percent of those machines are running Windows XP, which has been the most popular version of Windows to date, but it’s nine years old — a point not lost on IT decision makers.

A long PC refresh cycle

Not only is the refresh cycle of replacing aged PCs and laptops with new machines running Windows 7 arriving earlier than usual, but also with so many older PCs out there, the sales momentum “will extend into fiscal 2012,” she added.

Reller was diplomatic in responding to questions regarding HP’s recent decision to buy Palm and to, reportedly, use that firm’s operating system to drive its upcoming tablet computer instead of Windows.

“HP is a very important and strategic partner for us, and the [Palm acquisition] is still early days,” Reller said.

Stuart J. Johnston is a contributing writer at, the news service of, the network for technology professionals.