There is a lot of buzz, hype and chatter swirling around Microsoft Corporation (NASDAQ:MSFT) and its new Windows 8 operating system, which is due for release in late October. While the Microsoft brand has permeated many areas of the new tech society in desktops, smartphones, enterprise servers and networks, game consoles, video streaming devices, etc. However, while the company seems to be very stable going forward, why would CEO Steve Ballmer call Windows 8 the company’s “riskiest” bet?
There are some investors who would love to see the risk of Microsoft Corporation (NASDAQ:MSFT) pay off – most noteworthy are hedge-fund managers like Seth Klarman of Baupost Group.
It is an interesting statement by the man who runs Microsoft Corporation (NASDAQ:MSFT), one of the iconic brands in the world. But Windows 8 – which is being described as a mashup of Windows 7 and Metro – would be the result of a three-year development process, which means many millions of dollars of work has been performed to put this to market. There are a couple of writers who gave their thoughts – one looked at Ballmer’s comment and broke down why he thinks Ballmer said what he said, and another writer gave his take as to how this risk might pay off.
First of all, why would the head of Microsoft Corporation (NASDAQ:MSFT) consider Windows 8 such a risk for his company? First of all, while 75 percent of the company’s revenue came from outside the Windows Division in fiscal year 2012, nearly half of the company’s profits historically comes out of Windows. And if Windows didn’t exist, chances are the also-profitable Office Suite wouldn’t be used so much by businesses – which then might make nearly three-fourths of overall company profits come directly or indirectly from the existence of Windows. This might explain why Microsoft Corporation (NASDAQ:MSFT) takes several years to develop a new operating system. Not only that, but with the Metro interface, Microsoft is making a play away from desktops and toward smartphones and tablets, which might open the door further for Apple Inc. (NASDAQ:AAPL) and other companies to further use desktops models and gain market share with less competition.
It’s as if Microsoft Corporation (NASDAQ:MSFT)is going all-in on touchscreens and mouse interfaces and betting on desktops becoming obsolete. Are businesses ready for that transition? On the one hand, Metro is considered extremely simple to use and access, which would be a good fit for less-polished computer users, while also having features that the more technologically advanced users will enjoy. The theory is that Metro can help Windows 8 succeed – and while it may be the “biggest risk,” it also could have the biggest rewards if it can stick with loyalists and those searching for a versatile operating system for years to come.
