Intel (INTC) shares have spent the last few days trading green. A couple of analysts upgraded the NASDAQ 100 member because Microsoft (MSFT) will no longer support XP starting April 8, 2014.
does that mean to you if you currently run XP? No more security
updates, no more support from Microsoft, and software companies that
make Windows compatible software will likely stop making sure the new
software works on Windows XP.
Basically, you will be on your own if your computer runs on XP, and you'll be upgrading to something else as your computer will be more vulnerable to hackers than ever before.
Check out this warning/threat from Microsoft's Director of Product Management in Microsoft's Trustworthy Computing group. Tim Rains says, "What is the risk of continuing to run Windows XP after its end of support date? One risk is that attackers will have the advantage over defenders who choose to run Windows XP because attackers will likely have more information about vulnerabilities in Windows XP than defenders." That makes you feel comfortable, doesn't it? I am itchy already.
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He went on scaring, "The very first month that Microsoft releases security updates for supported versions of Windows, attackers will reverse engineer those updates, find the vulnerabilities and test Windows XP to see if it shares those vulnerabilities. If it does, attackers will attempt to develop exploit code that can take advantage of those vulnerabilities on Windows XP. Since a security update will never become available for Windows XP to address these vulnerabilities, Windows XP will essentially have a "zero day" vulnerability forever."
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While Wall Street has opined on what the "retirement" of XP means to Intel, and we on what it could mean to you, we haven't discussed what it means to Microsoft and its stock price.
According to statscounter.com, XP is the second most popular operating system in the world with 20.43% market-share as of August 2013. How about that? Piper Jaffray says between 150 million to 250 million PCs are likely to be upgraded by April 2014. That's a sizeable number folks.
Many users i.e. corporations and governments are likely to replace computers outright; hence, the Intel tie-in. Meanwhile, most retail customers will probably buy new computers (or will they swap a PC for a tablet?) or buy the software upgrade.
Now it's time to breakout the calculator. The Wall Street Journal reports that MSFT slashed the price of a combo deal for Windows 8 and Office 2013 to $30; normally it is closer $120.
Digitimes says nope, he number is closer to $60-$70 for PCs, and $30 is for tablets and some laptops. Online, the average price for to upgrade software is $70. For the sake of argument, we'll calculate that 25% will upgrade software and keep the same computer while 75% buy a new unit. That gives us an average selling price of $63.75 per sale. Apply that to Piper's lowball number of 150 million PCs, and we arrive at $10.162 billion in sales. At 2013's net margin of 28.1%, it works out to $0.34 share in EPS (probably more).
Overall: Like the Y2K scare, XP's retirement and vulnerabilities will likely lead to rising sales into the April 2014's deadline, which should juice Microsoft's (MSFT) stock price. However, shares could suffer afterwards as the forced conversion will move purchases forward, but most likely hurt sales starting April 9, 2014.