Windows 8– A sedate frenzy

 

 

 

 

 

  • It has not been a mad rush nor a scrum down but there has been more interest in Windows 8 (especially the Surface) than the initial reviews would have led me to believe.
  • Furthermore, those that have got their hands on one and played around with it for the weekend have found it to be better than they had been led to believe.
  • There were queues outside Microsoft’s stores (not in Apple’s league) but queues none the less.
  • While most the attention was focused on the Surface (which is back ordered for 3 weeks), the new Asus, Acer and Sony ultrabooks with touch screens did not go unnoticed.
  • Digging around in the Surface RT’s desktop mode, the device is a bit more capable than expected offering a full explorer experience, the ability to mount network drives and access files on the home network.
  • Whether one can get the software to access the contents of those files on the Surface is another issue, but it’s a step in the right direction.
  • I suspect that those that went to the Microsoft store to play with the new devices are a poor representation of the wider buying consumer in general and here the data is not so good.
  • Recent polls suggest that more than 52% of consumers have not even heard of Windows 8 and of those that have 60% have no interest in buying or upgrading to the new OS.
  • “Windows 7 is fine for me”, was a common quip.
  • However, it is not the Windows 7 crowd that Windows 8 targets.
  • It’s those that are still running Vista or XP on an ancient old laptop or desktop and for these users I think it is an interesting proposition.
  • The key to this cycle is the fact that the average age of laptops and desktops which has increased markedly since people started spending on smartphones and iPads.
  • With something exciting in PCs again, the average age should now begin to reverse.
  • That, plus a slowing of the haemorrhage of content consumers from old laptops to iPads will also help stop the rot.
  • Every new release of Windows in history has created a product cycle and I believe that Windows 8 will be no different.
  • Black Friday has just come and gone, and hurricanes aside, it will be important to see what kind of impact Windows 8 has had, if any, as a steer for what will happen for the balance of the year.
  • At the moment the very short term outlook remains very weak and even if there was an upswing in demand, there is not the inventory to meet it meaning that, best case, the rest of 2012 will be soft.
  • The cycle will look a bit different this time compared to previous cycles, but then they always do, but it will be a cycle none the less.
  • The stocks involved in this cycle are assuming that there is no real cycle to speak of which makes them interesting when it comes to an investment case for 2013.
  • Here the market share gain story of Asustek, Samsung and maybe Lenovo looks interesting as does the rising tide that floats all boat theme leading one to Intel and Microsoft.
  • I haven’t pulled the trigger on any of these yet as they all remain firmly stuck in the dumps but it is a theme I want exposure to before 2013 gets underway.

RICHARD WINDSOR

Richard is founder, owner of research company, Radio Free Mobile. He has 16 years of experience working in sell side equity research. During his 11 year tenure at Nomura Securities, he focused on the equity coverage of the Global Technology sector.

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