Microsoft (NASDAQ:MSFT) is expected to launch Windows 8, the next version of Windows, around mid-2012. It will work on both PCs and tablets, and will compete with Apple‘s (NASDAQ:AAPL) Mac OS X, iOS and Google‘s (NASDAQ:GOOG) Android. Windows 8 offers two modes – the desktop mode, which is like standard Windows, and the Metro mode – which is specifically suited for tablets.
While there are tons of applications available for standard Windows, they aren’t compatible with Windows 8 Metro mode. Microsoft has already made tools available to developers so they can create Metro apps, but it’s likely that they won’t be able to catch up with Apple’s iPad in terms of the number of available apps. Even Android which was launched for tablets more than a year ago still doesn’t offer many tablet specific apps – most Android apps are smartphone apps scaled up to fit the tablet interface.
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The chicken and egg problem for new platforms
The lack of apps might be one of the greatest obstacles to the success of Windows 8 on tablets. Until Windows 8 attract a significant tablet user base, it won’t be able to attract developers. And until developers build a lot of Windows 8 Metro apps, no customer would want to buy a Windows 8 tablet.
However, BlueStacks, which is developing an Android emulator for Windows, has announced that its Android App Player software will be compatible with Windows 8 in both the desktop mode as well as the Metro tablet mode.  This will enable users to use all Android apps seamlessly on their Windows 8 tablets, effectively bringing all 400,000 Android apps to Windows 8. This may attract customers to the Windows 8 tablet camp, buying enough time for Microsoft to attract developers to create native Metro apps.
We expect Microsoft’s Windows 8 to become one of the top tablet platforms in the coming years. Windows is one of Microsoft’s most important revenue engines, and accounts for almost 25% of its Trefis price estimate.
Our $32 Trefis price estimate for Microsoft stands nearly 25% above its market price.Notes: