(By Horacio Marquez )Microsoft Corp. (Nasdaq: MSFT) reported a strong quarter at the end of October on the back of resurgent demand in the PC market. But the key issue to watch is the important transition in the company's major technologies.
Microsoft just launched its very successful Windows 7 operating system, which has produced a major new upgrade cycle in the industry. In England, for example, Amazon.com Inc. (Nasdaq: AMZN) had more success selling Windows 7 packages than it did Harry Potter books. Windows 7 has major advantages over Vista, including speed, simplicity and booting time. This is prompting Vista users, as well as those who skipped Vista, to upgrade.
Windows 7 will be closely followed by the launch of Office 2010 in the first half of next year. Microsoft will herd businesses and consumers through a gauntlet of sales products: First, an upgrade of the operating system and then the core applications suite. The company is also releasing Windows Server 2008 R2, which will bring new cashflow.
Microsoft is also looking forward to challenges facing its distributed computing platform concept by setting the launch of its cloud computing initiative with Windows Azure for Jan. 1.
All of this change is taking place at the cusp of a major new technology cycle that will have a profound impact on the industry. So lets review these initiatives and their impact on the market and Microsoft stock.
The Cloud Computing Revolution
The thing to remember about the technology sector is that revolutionary changes, when they catch on, are superlative sources of profit. Therefore, there is a high premium associated with producing the new technology that will gain widespread acceptance. When this occurs new technologies leapfrog the old ones, no matter how established they might have been.
In this paradigm lies both the appeal of investing in high-tech companies – exploding profits – as well as the danger – the risk of sudden obsolescence. The result is volatility, as tech stocks reflect the shifting expectations of success in the endless fight for technological supremacy.
Hence, Microsoft, having reigned supreme in the PC market — enabled by the ever-increasing processing speeds produced mainly by Intel Corp.
