Microsoft Corporation (MSFT): Is The Tech Giant Headed On The Correct Trajectory?

Everytime Microsoft Corporation (NASDAQ:MSFT) unveils a new operating system, investors hesitate. The release of Windows Vista cost the company its stranglehold on the market. In 2004, the ratio of Microsoft Corporation (NASDAQ:MSFT) computers to Apple Inc. (NASDAQ:AAPL) computers peaked at 56 to 1. In 2012, 20 Microsoft computers were sold for every one Apple Inc. (NASDAQ:AAPL) computer, according to data from Asymco. That figure doesn’t include tablet and smartphone sales.

Lessons learned from Vista

Obviously, Microsoft would love to reach 2004 levels, which began to drop with the release of Vista. The company began to climb its way back up with Windows 7, so, as the company announced the release of Windows 8, it was understandable that investors met the news with trepidation.

After all, just before Windows 8’s release, Microsoft Corporation (NASDAQ:MSFT) shares dropped approximately 10% — a decline that happened in less than a month. Investors, hopeful that a new product would bring an increase in revenue, may have been eager to get in on the ground floor of an exciting new product.

But, those investors wouldn’t have done their research. History shows that Microsoft stocks actually drop following the release of a new operating system. Vista’s 9.6% drop was actually less of a drop than the 10.1% decline that happened after the release of Windows 98. But, even the release of Windows 95 and XP — both of which went on to become extremely popular Microsoft Corporation (NASDAQ:MSFT) operating systems — weren’t without share price declines just after the release.

Microsoft Windows 8 increase

For savvy investors, it came as no surprise when Microsoft Corporation (NASDAQ:MSFT)’s stock began to fall as release day neared. Earnings were down, as well, but this was likely related to consumers delaying purchase of new PCs that contained the soon-to-be-outdated Microsoft 7 operating system.

It’s not unusual for consumers to avoid purchasing technology in the days leading up to the release of a newer model. And with new PCs and laptops lasting longer than ever, anyone purchasing a PC today knows they’ll likely be stuck with that operating system for at least four or five years, maybe longer.

By December of last year, things weren’t looking very bright for Microsoft. Google Inc (NASDAQ:GOOG)‘s Android operating system seemed to be taking over phones and tablets across the world. Microsoft Corporation (NASDAQ:MSFT) countered with its Surface tablet, but Google is still leaving both Apple and Microsoft behind when it comes to tablet sales.

Tablets powered by the Google Inc (NASDAQ:GOOG) O/S are now outselling competitors thanks to inexpensive alternatives like Google’s Nexus and the Kindle Fire. This year, devices powered by Google are expected to claim nearly half of the market — last year, Apple Inc. (NASDAQ:AAPL) held 51% of the market, with Google still holding an impressive 46%.