Singing to a new Zune

Microsoft is working hard to transform consumer perceptions that it is solely a software company with a significant push into the consumer electronics sector.

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By  Aaron Greenwood Published  January 23, 2007

|~|Demir,-Armagan-----MICROSOF.gif|~|Armagan Demir, head of Microsoft’s Entertainment & Devices division in the Middle East.|~|Microsoft is working hard to transform consumer perceptions that it is solely a software company with a significant push into the consumer electronics sector. ECN spoke to Armagan Demir, the head of Microsoft’s Entertainment & Devices division in the Middle East, about the company’s strategy in the region. Electronic Channel News: Microsoft is recognised as the world’s biggest software developer. How does the entertainment and devices division fit into the company’s overall structure and what is its main purpose commercially? Armagan Demir: We established the entertainment and devices division in the Middle East in September last year. In turn, it supports three sub-divisions. We have a consumer product division, which manages our entire range of consumer-focused IT peripherals that includes keyboards, mice and web cameras. The second division, which is still in the early stages of development, will manage our consumer gaming products, such as the Xbox 360 gaming console, which we expect to officially launch in the region sometime this year. Our third division is the consumer and entertainment business, which is again in the early stages of development. This group will primarily coordinate the introduction of our portable music player, Zune. We still haven’t set a launch date for this product in the Middle East. It was launched in the US last year, where it has achieved considerable success. ECN: Why did Microsoft decide to establish the division in the Middle East? AD: There were a number of reasons. Microsoft is focusing more on the digital lifestyle and consumer electronics product categories internationally. This was evidenced by our push towards convergence products at CES 2007 (which was staged in Las Vegas last month). The Middle East consumer markets are developing rapidly, and we felt it was time to establish a dedicated division that could capitalise on consumer demand for these types of products. Our future product strategy also requires a dedicated sales team based in the region that has the capacity to promote these products in the marketplace and support our retail and distribution partners. ECN: What is your primary role as head of this division? AD: My main role at present is coordinating sales and marketing initiatives. We also have local distributors, but dealing with them is not the primary role of the group. We expect to expand the team further over the next six months to support our growth ambitions. ECN: What countries does the Dubai office manage? AD: The entertainment and devices division team based in Dubai covers the GCC countries, in addition to Jordan and Egypt. ECN: How many distributors do you work with in these countries? AD: We recently appointed a new distributor (Delta) for our consumer products line (mice, keyboards etc) in addition to a new distributor for our PC gaming range. We now have five distributors servicing the GCC markets and four in Egypt. ECN: There have been reports that some retailers in the UAE have been selling grey market Zune players imported from the US. Are you aware of this situation? AD: That may be the case as we don’t officially import it as yet, but I don’t have any specific cases I can provide you with. ECN: But surely grey imports pose challenges to your business? AD: Frankly speaking we aren’t really concerned with this trade prior to the official launch of a particular product. However, once we officially introduce a product, we work hard to protect our channel partners and crack down on unofficial distributors. There is always going to be a certain amount of parallel trade in regions such as the Middle East because it’s the nature of the industry. Channel engagement is hugely important to protecting the growth of our business. ECN: Do you think such activities could harm Microsoft’s reputation or negatively impact the product’s official launch in the region? AD: When we officially launch Xbox 360 and Zune here we will have to address this problem in conjunction with our retail partners. But at the moment it’s not a major concern. ECN: What challenges will the introduction of PlayStation 3 present to your business in terms launching Xbox in the Middle East this year? AD: We face competition in every market but of course Sony will steal a march on us here with the launch of the PS3 this month in the Middle East. We plan to officially launch the Xbox here soon, but it has been available for some time on the grey market, and a number of major retailers are currently selling the consoles in the UAE. ECN: Which countries will take the first official deliveries of Xbox? AD: The UAE and Saudi Arabia are scheduled to receive the first batch of consoles. These two countries offer huge potential to our business. Egypt and Kuwait are two emerging markets that also offer strong commercial opportunities for our business. ECN: Do you foresee any logistical issues arising in terms of distributing the console, given the strong anticipated demand from consumers? AD:We have very strong relationships with our distribution partners and customer base in the Middle East. It’s not an unknown market for us. I don’t perceive any specific challenges facing our business in terms of launching these products. ECN:What’s your impression of the retail landscape in the Middle East? AD: The UAE retail market is very mature and Saudi Arabia is becoming more so, as is Kuwait. However, we expect emerging markets such as Egypt to rapidly develop over the next decade, which will provide our business with new commercial opportunities. ECN: What sort of opportunities do you think the region’s smart home technology market offers companies such as Microsoft? AD: Home networking and media server-style technologies are proving very popular in the region’s developed markets, such as the UAE and Saudi Arabia. Middle East consumers are technology-savvy, they generally have high levels of disposable income, and they have a keen interest in high-tech gadgets. This is demonstrated by trends in the mobile phone market. The GCC has some of the highest penetration levels of smartphones worldwide. Consumers in this region are really interested in adopting new technology, particularly in their home environments. ECN: Most consumers perceive Microsoft as a software company. How hard is it to alter consumer perceptions about Microsoft given its push into the consumer electronics market? AD: We see Microsoft as a ‘technology’ company. We are one of the biggest technology companies in the world – we are not only about software. We have a presence in nearly every sector of the technology market, either as a third-party supplier of technology solutions or as a branded entity in our own right. We have two global business interests: digital business and digital lifestyle. We are also committed to investing in technology and growing our business across all product segments. ECN: How important is the consumer electronics market to Microsoft’s future growth? AD: It is hugely important. Our digital lifestyle products are key to our growth. Today, we talk about connected and convergent entertainment solutions. At CES, Bill Gates talked about this concept extensively. We are working to encourage the development of products that can be used across a variety of platforms, and can be interconnected. For instance, we are developing technology that will enable a consumer playing a game on their PC to challenge another player over the internet who is playing the same game but using an Xbox console, while someone else could join the game on their mobile phone. We are trying to make all technologies interconnected and platform free. We want to provide consumers with the ability to enjoy shared experiences regardless of what hardware platform they are using. ECN: What new products are you planning to launch this year? AD: In addition to Xbox 360 and probably Zune, we have other new consumer IT peripheral products planned. Every two months this year we plan to release new products. We also plan to launch a range of VoIP headsets. We are planning a major product rollout in various categories in 2007. ECN: What is the main message you are trying to get across to consumers? AD: To consumers we want to promote our entertainment ‘experiences’. The design and functionality and the connectivity of the products in our portfolio is very important. This extends to our range of PC accessories. We launched a new range of keyboards, mice and associated peripherals at GITEX in November, which have proven very popular with consumers.||**||

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