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Microsoft Corporation (MSFT)’s Windows 8 a Success?

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The good news is that consumer adoption of Microsoft Corporation (NASDAQ:MSFT)‘s Windows 8 operating system is still on schedule. This should help to alleviate the concerns of consumers completely abandoning the Windows ecosystem just because they don’t like the Windows Metro Interface.

Microsoft Corporation (MSFT)

The market-share figure

There is a lot of outspoken criticism toward the new operating system, but if consumers are starting to adjust and like the design, why bother changing it? A reported 5.1% market share really isn’t as bad as what people are making it seem, especially in an environment of flat-to-negative desktop shipments. The company is actually doing very well with its recent operating system. No one should ever expect a product roll-out of this scale to reach rapid consumer adoption. Rather, we should have the realistic expectation of a gradual improvement in market saturation.

Onuora Amobi from Seeking Alpha states:

“If you think about Windows Vista, it didn’t get a refresh; it got shelved and replaced entirely by Windows 7. This is a very different and a much more alarming development. Second, it’s a big deal because we have had enough time to be able to look at Windows 8 and objectively state, the experiment hasn’t worked. The sales numbers have been relatively underwhelming and public opinion seems to be pretty much settled at this point. The name ‘Windows 8’ is now associated with difficulty, drama and complications.”

This, however, is not completely true. The use of the Windows 8 operating system is almost reminiscent of using a smartphone or tablet device. I find it very hard to believe that anyone would need help to learn how to navigate through a desktop or laptop version of an iPhone or Android device. That being the case, there may be some who find it difficult to navigate through the device, or find the lack of customization unappealing. The Windows 8.1 update is intended to improve the customizability of the device. Given enough time, people will learn how to use the Windows 8 operating system and will become accustomed to the differences in both design and functionality.

Going forward, sales of the Windows 8 operating system license are likely to improve even further, as Microsoft Corporation (NASDAQ:MSFT) will no longer support Windows XP in 2014, according to Hewlett-Packard Company (NYSE:HPQ). Currently the Windows XP operating system has a 37.2% share of the market, according to Net Applications. That being the case, if Microsoft Corporation (NASDAQ:MSFT) no longer supports the Windows XP operating system, there will be a rapid increase in the number of Windows 8 licenses sold. Therefore, all the speculation of declining Windows 8 license sales, not enough demand, etc., should be ignored given the product refresh cycle from Windows XP.

Who else but Hewlett-Packard?

I think it is time to consider investing in Hewlett-Packard Company (NYSE:HPQ). Hewlett-Packard is going through a restructuring that will improve the overall profitability of the business. The vast majority of Hewlett-Packard’s growth in earnings is driven by a declining head count, and process-driven improvements in how the business is run.

Source: Ycharts

Over the past year, Hewlett-Packard Company (NYSE:HPQ) has been able to improve the profitability of its business from a negative 30% to a positive 3.9%. The company reported a weakness in profitability due to goodwill impairment costs (reporting the differences in fair market value for businesses it had acquired previously). The company’s weakness in earnings was temporary.

One of the biggest concerns that investors have had in the company is whether or not the business can grow its sales. To address these concerns, I believe that the company will diversify out of its hardware business into cloud virtualization and software. I also believe that sales of desktop and laptop computers will improve once support for Windows XP ends in 2014.

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