60M Windows 8 Licenses Sold…Time to Buy Wintel

Alvin is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

As of January 8, 2013, Microsoft (NASDAQ: MSFT) has sold 60 million Windows 8 licenses. Back in November, Microsoft reported it sold 40 million Windows 8 licenses in the first month of its release. This puts Windows 8 sales on a similar pace as Windows 7. Having sales similar to Windows 7 is an impressive achievement because Windows 7 is a very successful OS and Windows 8 uses a radically different UI from previous versions of Windows.

Adoption

In its Windows Blog, Microsoft states, “…Windows 8 has sold 60 million licenses to date. This represents the cumulative sales of Windows 8 including both upgrades and sales to OEMs for new devices. This is a similar sales trajectory that we saw with Windows 7.” The inclusion of sales to OEMs should make investors a little cautious. Windows 8 uses a new UI so sales to OEMs might not be completely indicative of consumer adoption. However, the sales number is still impressive because Microsoft’s Windows 7 sales also include sales to OEMs.

Also, according to netmarketshare, Windows 8 has captured 1.93% of the Windows OS market. According to eTForecasts, there were 1.6 billion active PCs worldwide at the end of year 2011. Using Windows’ 91% PC market share, one can readily approximate 28.1 million Windows 8 PCs in use, which is a respectable number. This is a rough approximation because the number of active PCs also includes tablets. However, this is balanced by the PCs sold during year 2012, which are not included in the 2011 number.

A Unified Approach and Wintel

Overall, 60 million Windows 8 licenses sold is a positive for Microsoft. Microsoft generates revenue regardless of whether the company sells a license to an OEM or directly to a consumer. This news is also a positive for Intel (NASDAQ: INTC). A license sold requires hardware and Intel dominates the CPU market. Similar to Microsoft, Intel generates revenue whether it sells its chips to OEMs or directly to consumers. Currently, Intel is trading at a trailing PE below 10. In addition, Intel has a dividend yield of 4.3%. On the other hand, Microsoft has a trailing PE of 14.4. However, Microsoft’s PE is inflated because the company booked a onetime $6.2 billion charge in year 2012 for its acquisition of aQuantive.

While Windows 8 has received a lot criticism, Microsoft’s unified OS approach with Windows 8 is a big advantage. Windows 8 is designed to work on both desktop PCs and tablets. This contrasts with the OS’s used by Apple (NASDAQ: AAPL) and Google (NASDAQ: GOOG). Both Apple and Google use a different OS for tablets and PCs. Apple uses OS X for the Mac and iOS for tablets. Similarly, Google designed Chrome OS for notebooks and Android for mobile devices.

There are numerous advantages to having a single OS powering both PCs and tablets. The most important advantage is probably the compatibility it provides. This is especially true for Windows. There are millions of legacy programs available for Windows that users can install on a Windows 8 tablet. A unified approach also benefits Microsoft and its partners because it alleviates the discrepancy in the number of apps when comparing it to iOS or Android.

Bottom Line

Intel and Microsoft are pretty much in the same boat. Both companies missed the rise of mobile devices and are now playing catch up. A lot of their business hinges on PCs, so solid sales of Windows 8 licenses are a big positive for both companies. The two companies already have good dividend yields and are highly profitable and the sales number from Microsoft just makes the bullish argument for both companies even stronger. Lastly, for an explanation on why NPD Group’s PC sales numbers might not be an accurate indication of Windows 8 demand go here. Anyway, Microsoft and Intel are strong businesses and make great investments.


iamgreatness owns shares of Intel and Microsoft. The Motley Fool recommends Apple, Google, and Intel. The Motley Fool owns shares of Apple, Google, Intel, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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