The Easiest Way to Lose Money Right Now: Bet Against Windows 8.1

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

The public beta for Microsoft's (NASDAQ: MSFT) Windows 8.1 will be available for the first time this week, which means the final release is likely headed for September or October. Earlier this month, the company announced that shareholders as of Aug.15 will receive a dividend of $0.23 per share. With those two developments in mind, now's a great time to discuss why you should ignore the haters, hold on to your Microsoft shares, and watch the value of your portfolio grow alongside the market share of Windows 8.1.

Windows XP Still Alive...But Dying

Microsoft recently announced that it would terminate life support for Windows XP next April. That support includes everything from bug fixes to security patches, and XP's already been granted a reprieve before, so it's not likely to happen again. This makes IT pros nervous, because using an operating system that doesn't receive regular security updates is a dealbreaker when it comes to corporate networks.

I know what you're thinking. “So what? Who in their right mind would use an operating system from 2001?” You should sit down or at least look both ways before reading on. NetMarketShare data shows that more than a third of computers run on XP. Right now. Not 13 years ago when it was released. Right now.

<img alt="" src="http://g.fool.com/editorial/images/53447/netmarketshare_large.jpg" />

Source: NetMarketShare.

WebMonkey wrote a great article on the impending doom of Windows XP, including the same graphic you see above.  The only difference is that its snapshot is from April.  In just two months, the numbers have changed.  Most IT industry folks think users will pick Windows 7 over Windows 8, but that doesn't explain the change. If you look closely, the percentage point that was lost by XP, was picked up by Windows 8, not 7.  This is likely because manufacturers are preinstalling Windows 8 on consumer machines. As older machines are replaced with newer ones, XP's market share declines.

Why This Matters to You

Just before the economy started to turn south, Microsoft released a dud of an OS called Windows Vista. Many corporate customers decided to wait for something better. Strike one.

Then the economy turned downward, and those same corporate customers tightened their belts. When Windows 7 came out in 2009, no one was buying anything. While market share has grown significantly since then, corporate sales are still slower than expected. Strike two.

Windows 8 was born into a slightly better market this January, but had the disadvantage of being very different from previous version of the OS. Ball one ... which brings us to the present and the release of the Windows 8.1 public beta.

Windows 8.1 Hits A Timing Home Run

With more than a third of Windows' market share running on technologically antiquated software, and the stock market showing signs of a pulse in recent months, IT departments everywhere are making plans for computer refreshes.

With Apple's (NASDAQ: AAPL) Mac OS still not quite ready for most enterprise environments and Windows 8 not everyone's cup of tea (“Hey, where's my start button?”), those IT departments decided to wait again. Ball two.

But now we have Windows 8.1 in public beta, and it's made some changes (“Oh, there it is.”).

When you combine the recent economic uptick with an aging fleet of corporate computers and the release of a new OS that answers users' previous complaints, you've got a home run on your hands. Add to that the fact that governments, which are some of Microsoft's biggest volume customers, are typically required to purchase the latest versions of available software, and that home run starts heading for the back fence.

Bottom Line: Microsoft Isn't Dying

While Windows 8.1 has huge potential written all over it, it certainly isn't the only product Microsoft has on its growing shelf. Xbox One will arrive in time for the holiday shopping season, Office 2013 is now a subscription service, which means year after year returns. Bing search now powers both Yahoo!'s and Apple's iOS search results. And the cloud computing service Azure is growing, to the tune of $1 billion in revenue in the last 12 months. Microsoft isn't going away, despite what your friendly neighborhood hipster might have you believe.

Quite the opposite, in fact. Microsoft has been steadily growing, has a number of new products ready to make you money, and is heading into a perfect storm of corporate and government spending to boost its year-end and 2014 Q1 sales. 


Joe Hinrichs has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple 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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