Should You Buy Microsoft Before the 2012 Holiday Shopping Season?
Maxwell is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
This holiday season, several large tech companies, including Microsoft (NASDAQ: MSFT), Google (NASDAQ: GOOG), and Apple (NASDAQ: AAPL) plan to release updates of popular electronic devices and software programs. With so many new products comes increased competition and perhaps lower prices for consumers. For companies like Microsoft, which took its first public loss this year after writing down the costs to acquire aQuantive, an online ad company, the upcoming holiday season could provide companies with one last chance to increase sales/revenue.
Several factors point toward a positive holiday shopping season as compared to previous ones. As a rule, the majority of consumers tend to spend more after a major election – even if the person they vote for doesn't win. Also, with 32 days for shopping this year, a little longer than usual because Thanksgiving falls early (November 22), people have more time to compare and make purchases. But with lingering unemployment, high gas prices, and a shaky stock market, it's difficult to tell how much people will actually spend.
For electronics and mobile devices, this season could be very profitable, however. Even though cost of living expenses have risen in many areas throughout the U.S., consumers may opt to upgrade mobile devices or invest in a new tablet computer instead spending money on several smaller, less expensive items. Some analysts have predicted a 3%-4% rise in overall retail sales from last year. This could have a huge impact on electronics and other tech items.
So given the uncertainty of the upcoming season, it's important for companies to market new products (and updated versions) creatively and mindfully to attract the most consumers.
Microsoft's Latest Ventures
Microsoft recently announced its plan to release 100,000 Windows 8 apps by February 2014. The company also hopes to sell 400 million Windows 8 devices by July – a challenging goal even for one of the largest tech giants. So far, the company has invested millions to make sure its app store is a safe place for both vendors and customers to upload and purchase apps. Along with an updated platform for selling apps, the company also plans to add an advertising component with each app to earn additional revenue. Microsoft plans to share a percentage of earnings from ads with apps developers.
In a very short time, apps have become very popular with consumers – and companies have taken notice and want to increase revenue by charging for ad space within these programs. Similar to search engine advertising, businesses will most likely bid for placement or frequency. For app developers, this is an opportunity to earn even more for their creations. The Windows 8 OS debuts on October 26– just in time for the holiday shopping season. Microsoft also plans to release its new tablet, Surface, and its Windows Phone 8 around the same time.
Other tech companies planning product releases between now and the end of the year include Google and Apple. Google has plans to release a new version of its Nexus phone while Apple plans to release the iPad Mini.
It All Comes Down to Marketing
Much like teachers and business trainers who rely on programs like test designer to help create tests for students and employees, sales and marking teams compile results of previous ad campaigns to learn which ads work and which do not. Similar to choosing the appropriate questions to include on a quiz or exam, marketing teams must create (or recreate) effective campaigns that really resonate with consumers.
So far, Microsoft has spent a great deal of time talking about Windows 8. For the past year, the company has released demo versions for consumers, programmers, and others to use and provide feedback. And even though gathering information concerning usability and other features was the main reason for releasing demos, the company also relied on demo versions to create 'buzz'.
But Microsoft should start marketing its other products, namely its Surface tablet and Windows Phone 8, more aggressively if it wants to compete with Google and Apple. Marketing the Windows 8 OS requires much less time and money in advertising costs since Windows is still one of the most popular operating systems on the market. But to compete with Android (the most popular mobile OS) and the iPad, Microsoft will have to develop a compelling ad campaign to convince consumers (especially if the company expects to sell 400 million devices by next July).
After the Season
After the holidays, the retail market typically turns stagnant. Even though some consumers will wait to purchase tech gadgets in the hopes of receiving an even deeper discount, most people make these types of purchases before the New Year. Releasing 100,000 new apps for windows in February was a smart move on Microsoft's part. The availability of new apps provides consumers with something to look forward to even after purchasing the new OS. And for those who have waited until after the holiday season, 100,000 new apps is quite the incentive to go and make a purchase.
Know What You Own
It's been a frustrating path for Microsoft investors, who've watched their company fail to capitalize on the incredible growth in mobile over the past decade. However, with the release of its own tablet, along with the widely anticipated Windows 8 operating system, the company is looking to make a splash in this booming market. In this brand new premium report on Microsoft Fool analysts explain that while the opportunity is huge, the challenges are many. Also provided are regular updates as key events occur, so make sure to claim a copy of this report now by clicking here.
StockCroc1 has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple, Google, and Microsoft. Motley Fool newsletter services recommend Apple and Google. 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.If you have questions about this post or the Fool’s blog network, click here for information.