Our Take On Windows 8: What It Could Mean For Microsoft
Despite the mixed reviews of Microsoft’s (NASDAQ:MSFT) Windows 8 OS in the couple of weeks after its release, we think that the platform could be a first step in revolutionizing the way that traditional laptops and desktops are laid out. Specifically we think that the touch screen feature of Windows 8 will lead to a generation of laptops that convert into tablets, which could eat into overall tablet sales and stimulate PC sales. Additionally, we think that Window 8’s similar UI across devices will drive PC and phone sales among enterprises and in the emerging markets.
See our complete analysis of Microsoft here
Touch Screen Laptops Could Eat Into Tablet Sales
- Up Nearly 70% Since The Beginning Of 2023, Where Is Microsoft Stock Headed?
- Up 63% Since The Beginning Of 2023, How Will Microsoft Stock Trend After Q2 Earnings?
- Microsoft Stock Is Up 45% YTD And Outperformed The Consensus In Q1
- Microsoft Stock Outperformed The Expectations In Q4
- Microsoft Stock Is Fairly Priced At The Current Levels
- What To Expect From Microsoft Stock In Q3?
One of the new, and in our opinion, most exciting features of Windows 8 is that the OS is touch screen compatible. This feature has prompted OEM’s such as Acer and Lenovo to release touch screen laptops, a feature that isn’t yet matched by Apple’s (NASDAQ:AAPL) Macbooks.
We think that the touch screen feature is especially useful for computers such as Lenovo’s Thinkpad Twist, which can be converted from a laptop to a tablet. This line of products appeals to both PC users and tablet users, and can cannibalize some tablet sales if laptops continue to get thinner and faster. This could spell trouble for tablet manufacturers as users could opt to buy a small laptop which converts to a tablet versus buying a standalone tablet. If this materializes, we could see PC sales increase faster than our forecasts, consequently providing upside to our current price estimate for Microsoft.
Platform Integration Provides Opportunity for Cross-Selling
Another big selling point for Windows 8 PC’s is the integration that it possesses with Windows Phone 8 and the Surface tablet. We think that a similar Windows experience across all major devices will be popular among enterprises where Microsoft Windows is the primary OS of operation. A company’s employees will not have to learn different interfaces for different devices and this can enhance their productivity over the long term.
Additionally, we think that the similar Windows 8 and Windows Phone 8 user interface offer a significant opportunity for Microsoft in emerging markets. Since users in emerging markets tend to first access the internet via smartphones, the Windows Phone 8 OS will be an avenue through which users gain familiarity with Windows. When these users have the income to buy a PC, the similarity between Windows OS platforms is likely to push them towards buying a Windows based PC. At present, this is a differentiating factor for Microsoft since neither Apple or Google (NASDAQ:GOOG) have operating systems that look and feel so similar across devices.
Conclusion
Overall, we think that Windows 8 is an operating system that has the potential to revolutionize the PC industry. Its touch screen compatibility, combined with the higher processors speeds and solid state drives now available, will give users access to some of the fastest, most fluid machines they have ever owned. We think the touch screen feature is a real differentiating factor which could make Windows 8 popular amongst consumers and will be an area where competitors Apple and Google will have to play catch up.
We currently have a $41 price estimate for Microsoft, which is approximately 40% above the current market price.