No Rally Why Microsoft's 40 Million Windows 8 Sales Fails To Impress

Microsoft Windows 8 is officially a success. The company sold 40 million Windows 8 licenses since its launch. This beats Microsoft sales for Windows 7 by momentum, but there are already 600 million installations of Windows 7 in the PC market. With this incredible feat, Microsoft shares did not move much. Shares continue to be on a downward trajectory, falling from $31.45 in September to $27.08 at the time of writing:

Let’s break down the headline. 40 million units were sold. The price for each license was $69 for the upgrade, $99 for the OEM and $139 for the Pro Pack pre-ordered. Computers purchased after June 2012 may upgrade to Windows 8 for $14.99. Anyone running XP/7/Vista who download Windows 8 may buy the software for $39.99. Assuming 100% sales at various price range, the revenue generated from Windows 8 so far are:

From the above table, it may be seen that revenue varies widely, from between $599.6 million to as much as $5.56 billion. Microsoft has around 7.64 billion shares outstanding.  The addition to EPS, assuming a 50% margin varies widely too:

Analysis:

Investors are watching earnings growth Microsoft makes from Windows 8 over time. It is too early to forecast growth rates for the company, and the negative trend for PC’s needs to be offset by growth for tablets, Windows phones, and desktops running Windows 8.

Business Section: Investing Ideas

Investors have so far ignored the power of vertical integration with Microsoft. With the Department of Justice restrictions imposed finally ending, Microsoft may freely integrate Windows Phone with the PC, and then with XBOX. Even as a blip, 750,000 sales of XBOX 360 consoles during Black Friday illustrates entertainment tied with other Microsoft platforms has potential. Investors who think Microsoft Windows 8 has a strong future should look at:

 

1. Microsoft Corporation ( MSFT, Earnings, Analysts, Financials): Develops, licenses, and supports a range of software products and services for various computing devices worldwide. Market cap at $227.92B, most recent closing price at $27.08.

 

2. Nokia Corporation ( NOK, Earnings, Analysts, Financials): Provides Internet and digital mapping and navigation services worldwide. Market cap at $12.16B, most recent closing price at $3.17.

 

 

3. Dell Inc. ( DELL, Earnings, Analysts, Financials): Provides integrated technology solutions in the information technology (IT) industry worldwide. Market cap at $16.95B, most recent closing price at $9.77.

 

4. Intel Corporation ( INTC, Earnings, Analysts, Financials): Engages in the design, manufacture, and sale of integrated circuits for computing and communications industries worldwide. Market cap at $99.17B, most recent closing price at $19.93. The CEO announced he will retire in mid-2013. Intel fell on the news but now has a POP (Price of Profit) of just 11.

 

Microsoft’s main competitor is the cloud providers, namely  Google (GOOG).

 

5. Google Inc. ( GOOG, Earnings, Analysts, Financials): Google is the world’s most popular search engine. Market cap at $220.39B, most recent closing price at $670.71.

 

 

6. Amazon.com Inc. ( AMZN, Earnings, Analysts, Financials): Operates as an online retailer in North America and internationally. Market cap at $110.25B, most recent closing price at $243.40. AWS is a cloud service that enables companies to host and to run their environment in the cloud.

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