Windows 8: Profiting from the Inevitable

Apple and Google are working to become significant software platform companies, like Microsoft has been for a long time.  Recently they’ve had some remarkable success: Apple in iPods, iPhones and now iPads; and Google in smartphones. However, there is no platform that Apple and Google can produce, that Microsoft cannot also produce.  After all, Microsoft has created the still dominant Windows, Office and Xbox platforms. Windows Phone 7.5 and its “metro” touch interface is recent testament to the ability to develop excellent new platforms.  With the forthcoming Windows 8, Microsoft is doing the hard work of integrating the touch interface with its traditional windows desktop. The result is clearly a win/win scenario since the customer will get a 2 in 1 tablet PC product for less than half the price of the comparable, but separate tablet and microcomputer products like the iPad and Macbook.  While Apple ostensibly could do a similar integration, it seems to prefer instead to have people buy both products separately, at considerable extra cost.  As for Google, it can’t compete in this arena, because it has no desktop platform.

By  this time next year, what is already clear to keen observers today will also be clear to everyone: the Windows PC will be extending its domination of computing from the PC market to the tablet market. Given Microsoft’s dominant market position with Windows, this is all but inevitable.  The new machine will be called the Windows PC tablet or the Windows tablet PC. With time, it will most likely again simply be called the Windows PC.

For investors, Windows will again be a growth story along side its other major growth businesses (i.e.: Microsoft Business Division/Office, Server and Tools).  Given Microsoft’s low valuation on the stock market, one should reasonably expect new growth to drive up its stock market value even as its earnings grow more rapidly.  You heard it here:  it is reasonable to expect the stock price to double over a few years.

P.S. For a sampling of the new Tablet PCs launching this fall, see:  http://www.microsoft.com/en-us/news/presskits/oem/imagegallery.aspx