An internal battle is raging at Microsoft over whether and how fast the company should open more retail stores.
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According to sources close to the company, CEO Steve Ballmer and COO Kevin Turner are both hot on the idea of matching -- or even surpassing -- Apple's retail presence of over 300 stores. The stores are a big reason for Apple's success in the last decade, as they give customers opportunities to play with products like the iPad and iPhone.
But Microsoft has only opened 8 stores in the year and a half since it launched its retail initiative, and has only announced two more, in Atlanta and Seattle, for a total of 10.
The reason: the stores are expensive to build -- Microsoft wants them to be high-profile showcases like Apple stores are -- and most of them aren't making money.
Unlike Apple, the products on sale at Microsoft stores are also available from hundreds of other retail outlets, including big box stores like Best Buy, usually for the same price. That doesn't give the stores a lot of sales traction -- people may stop by from time to time to check things out, but when they go to buy, they have plenty of other options.
If Microsoft tried to open 100 stores per year, capital expenditures would climb and investors would scream -- they're already frustrated with the money Microsoft has spent on its data centers over the last five years and its financial losses in search against Google.
As a result, Ballmer has been convinced to hold back. But if the stores start to turn the corner -- or if Microsoft decides it needs a retail footprint to sell products like Windows Phone 7, which compete for shelf space in places like the AT&T store, then the company could ramp up.
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