Microsoft Fans May Have Hope After Vista

Microsoft (MSFT) will get a nice lift this year, according to at least one analyst, as its Windows 7 operating system reboots the company after Vista's ignominious showing.

Investors can be forgiven for snickering at such optimism. And as Microsoft watchers will attest, new versions of Windows have almost always delivered more disappointment than delight.

But fittingly, a big part of this success story is built on the ruins of Vista, Microsoft's last operating system. More than 1 billion PCs run on Windows, and most of those users balked at upgrading to Vista from XP. The fear was that it would suck up all the system's resources with little payback to show for it.

Assuming Windows 7 lives up to its glowing early reviews -- TheStreet.com's gadget guy Gary Krakow found it "lightning fast" -- some small but significant chunk of PC users will upgrade to the new system or buy new computers running the next OS.

Collins Stewart analyst Sandeep Aggarwal estimates that 2% of the 1 billion eligible PC owners will upgrade to Windows 7 in the first year, creating an as of now underappreciated windfall for Microsoft.

"We believe that Windows 7 can give Microsoft a lift of $1.64 billion in incremental revenue and 11 cents in earnings per share in the first 12 months after the launch," Aggarwal wrote in a research note Thursday.

It's a modest estimate and very much in keeping with one of the worst consumer tech spending downturns in our lifetime. Aggarwal even sees the recession playing a hand in Windows 7 sales as consumers opt for software upgrades in lieu of more expensive PC purchases.