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TheStreet Open House

Malware's Boom for Microsoft

Stocks in this article: MSFT

NEW YORK (TheStreet) -- It seems that Microsoft's (MSFT - Get Report) Windows XP was marginally safer in Q4 2013 compared to newer operating system versions. However, this trend is unlikely to continue, and if business owners want to own the safest version of Windows they will have to jump straight to Windows 8 or 8.1.

According to the Microsoft Security Intelligence Report, the PC infection rate on all Windows operating systems went up between Q3 2013 and Q4 2013. Windows XP's infection rate went up from 9.5 per thousand scanned computers to 24.2 per thousand scanned computers between Q3 and Q4 2013. The infection rate on Windows XP was lower than Windows Vista and Windows 7. However, of the group, Windows 8 had the lowest infection rate at 17.3 per thousand computers scanned.

Recently, Windows XP was shown to have security flaws indicated by Heartbleed. Furthermore, Windows XP no longer received support from April 2014 onwards. However, Microsoft made a quick exception by making patches to Internet Explorer, which included Windows XP users.

Microsoft's licensing business depends on whether it can convince consumers to buy newer versions of its operating system. If older versions are perceived to be marginally safer, or have better security features, Microsoft's strategy of selling newer devices under its One Microsoft ecosystem will be impaired.

Given the recent issues with heart bleed, plus the lack of updates, Microsoft has been able to successfully transition some business clients to newer versions of the Windows operating system.

Microsoft's most recent quarterly results indicate that it was able to grow its Window professional license base by around 19% year-over-year. So with the end of Windows XP support, Microsoft has been able to boost professional license sales (basically operating system licenses sold for business use).

However, non-professional licenses, basically PCs aimed at consumers, declined by 15% in the same quarter as a result of Microsoft's inability to come up with a tablet device that's cost competitive with Android tablets. Furthermore, Microsoft's Surface Pro hasn't been able to take as much market share away from Apple in the high-end.

Overall, Microsoft's strategy in PC licensing hasn't performed as well as analysts and investors would have liked. Other operating segments, such as commercial licensing, consumer electronics, Bing, etc., drove top line performance in the most recent quarter.

So even though Windows XP was safer than Windows Vista and Windows 7 in the fourth quarter of 2013, it's unlikely that users will continue to hold onto the aging yet classic Windows XP operating system. With a vast majority of PCs running on Windows
7 currently, the recent trend in malware infections may cause businesses to leapfrog from Windows XP to Windows 8.1.

To read more of Alex Cho's work, click here.

At the time of publication, the author held no positions in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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