Everybody seems to agree that Windows 7 will boost sales at Microsoft (MSFT). The disagreements are over by how much and when?
The software, a favorably reviewed replacement for Microsoft’s widely reviled Vista operating system, goes on sale on October 22.
The pent up demand is potentially huge. Estimates say that 80% of the companies running their PCs on a Microsoft operating system never upgraded to Vista. Vista was introduced in 2007 and Windows XP goes back five years before that so these machines could be running software that’s as much as seven years old.
And about 80% of companies say they plan to switch to Windows 7 in the next two years, according to ISI Group.
How much of that will be in the next year?
Goldman Sachs estimates that Microsoft’s sales of the Windows operating system will climb 9% to $16.3 billion in 2010.
That doesn’t seem huge until you remember that Windows sales are projected to decline 10% in 2009.
But even a 9% increase in sales will depend on a pick up in the sales of PCs themselves. Customers typically upgrade to a new operating system when they buy a new computer. So the question for Microsoft is when will corporate budgets include big numbers of new PCs?
Windows 7 could break the typical pattern for operating system sales, however. The software will run on older PCs and earlier test customers report that 60% of their existing software runs on Windows 7.
And then there are some new features that might give the software some buzz. It supports touch navigation, for example, so that users can control their software using their fingers.
In the end though, my guess is that neither those new features nor that backward compatibility are as important for the pace of Windows 7 sales as the speed of the economic recovery.
So it isn’t so much when will customers buy Windows 7 but when will corporate customers feel like they can replace their aging fleets of PCs?
Jim: Do you know anything about either of these two companies? Great Point Energy and Tendril Networks?
I’m with DeficitHawk. MSFT must be traded like a mature cash generator rather than a growth stock which means you must be ruthless about keeping the pe you buy it at reasonable. Don’t expect a return to the high pe’s of the past. Don’t let the hype surrounding Windows 7 sucker you into paying up for this stock. MSFT needs a good result from 7 just to keep it’s current cashflow levels let alone generate any big increases.
Bottom line….don’t buy it above $22. There are so many better choices! Jim has a long list!
I’m loaded up on the Wintel trade. Mr. Ballmer has put the knife into XP’s heart. It’s time for the corporations to pony up and move forward. With the new Intel gear they’re going to save on big on energy. I spent a few years in the IT world and Microsoft and Cisco are entrenched in the training for new IT people. I don’t see business throwing away that investment in the near future.
I’ve made the mistake of buying msft at least twice before. It’s gone no where both times, and personally, I see no compelling reason it should go anywhere this time.
In fact, I think msft is riskier than it has been for at least a decade. Computing is really gearing for a revolution based on remote operating systems – nearly everything will move to the Internet. Just mho though.
ncoppersmith is right about his comparisons of OS’s. However, consider this; my work computer is less than a year old and running on XP pro. Why? Because my home computer’s performance running on Vista is just plain HORRIBLE! The equation they need to consider is not so much new PC purchases, but a “wait and see” attitude with “7”. After such a terrible product as Vista, I’ll wait and let everyone else work out the bugs. I have the $ to either buy a new PC or spend the $ on a new OS. The question is who will get my business; Microsoft or Apple? They need to think about that!
In the present state of the economy I believe that corporations will be more likely to spend the cash their holding on new equipment rather than people. Especially if the new equipment will squeeze more productivity out of the people they have.
I think one of the things that are important to remember, is that the need for faster, bigger, better computers is driven a lot by the gaming market segment. The latest Intel Core i7 with 8Gb of RAM is not going to help Word perform any faster. Many corporations skipped Vista because of it’s abysmal performance initially, and compatibility issues with existing applications. With Windows XP application virtualization available with Windows 7, the argument to stay on an aging dinosaur of an OS becomes thin. If you want to use over 4GB of RAM in a machine you need a 64 bit operating system, and Windows XP 64 never gained any traction whatsoever. Since 64 bit computers have been available since the Athlon 64 and later model Pentium 4’s, companies and gamers looking to wring better performance out of their PC’s for things like CAD, 3D Design, Video/Photo editing, and the latest games, need a 64 bit OS. I think you’ll see a very quick adoption of Windows 7 in the consumer segment, which typically leads to faster adoption by the industry. (when the CEO asks why his office PC still uses WinXP but his home computer/netbook runs this new Windows 7 thing and why haven’t we upgraded yet many times logic and rational reasoning from the IT department falls on deaf ears) Considering that the special pre buy for Win7 at discount sold out in less than two weeks, I don’t think that sales of Win7 will be nearly as sluggish as Vista.