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Microsoft (NASDAQ: MSFT) Sees Buzz Over Windows 8 Preview

 March 08, 2012 01:30 PM

Last Friday, Microsoft (NASDAQ:MSFT) ended at $32, marking a 1.9% gain for the week. (The company's stock is currently up 23% this year.) While there have been concerns that a slowdown in the European economy would hit both corporate and consumer tech spending, the software giant has produced consistently good returns for its stockholders.

Last week, Microsoft gave a preview of Windows 8, its new operating system, at the World Mobile Congress in Barcelona. (Windows 8 is scheduled to be launched later this year.) Analysts note that the company has been trying to maintain revenue from a waning PC market, while also establishing a stronger presence in the fast-growing sector of mobile devices. The latter has so far been dominated by Apple's iPhone and iPad, and Google's Android software. Garner Inc. analyst David Cearley said, "Microsoft's future path is riding on Windows 8 and its success. This is a chance for Microsoft to re-establish itself in a market where it's becoming increasingly irrelevant. Microsoft is late to the game and this is a different game than they have been playing. But if they hit a home run with Windows 8, it could still turn some things around."

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For now, Microsoft is riding on the general optimism over Windows 8. The company's stock has recently been trading at its highest levels since April 2008. It has also been observed that Microsoft's financial performance traditionally improves when it releases a new version of Windows, and the last upgrade was in October 2009 when Windows 7 was introduced. Nomura Securities analyst Rick Sherlund rated the company as a "buy", while giving it a $37 price target. Sherlund wrote, "The period between beta release and release to Manufacturing (we estimate end of July or August) of a major new version of Windows has tended to be the richest sweet spot in the product cycle, driving the stock 21% higher, on average."

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From the preview, Windows 8 appears to be very different from its predecessors. Moreover, its versatility will enable it to run both PCs and tablets. Sanford Bernstein analyst Mark Moerdler rated Microsoft as "outperform" with a $37 price target, saying that Windows 8 "delivers superb user experience, is competitive against iOS and Android, and makes Apple iOS and Android look old-fashioned."

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