Which Tech Stocks Should You Watch When Microsoft Rolls Out Windows 9?

Chris Lau, Kapitall: Could the launch of Windows 9 benefit Microsoft and some of its biggest suppliers?

Even though Microsoft (MSFT) reported a good quarter, perception by the public regarding any of its operating systems after Windows 7 continues to be negative.

But this did not prevent Microsoft from generating $24.52 billion in revenue. The strong results overshadowed the fact that OEM revenue declined for Windows by 3% this quarter.

Read more from Kapitall: Time to Shop for Undervalued Consumer Goods Stocks as Confidence Rises?

Even if uptake for Windows 8 and 8.1 is slower than what investors would like, there is hope for Windows 9. Microsoft is responding more quickly than it has in the past with product refreshes, so when Microsoft releases Windows 9 around April 2015, there could be several beneficiaries.

Chip makers

AMD (AMD), NVIDIA (NVDA) and Intel (INTC) would benefit from sustained sales for PCs. AMD and NVIDIA both profit from sales of discrete graphics cards and Intel relies partly on sales of desktop processors. AMD does as well, although it is currently undergoing a two-year transition. 

Part of AMD's transition is reinforcing its focus toward low-end desktop and notebook chips. Consumers should also expect better integrated graphics performance from Kaveri, which was released in December.

Click on the interactive charts below to see data over time. Sourced from Zacks Investment Research.

Windows 8.1 “Update 2” will be released before Windows 9, around the time that support for Windows XP officially ends. Thus there are two more catalysts ahead of Windows 9 that could benefit the PC industry.

Windows 9 gets back start menu

Microsoft will bring back the Start menu in Windows 9. Aside from aesthetics and usability, the Build 2014 conference should give investors a better idea of the changes that will happen for the Windows ecosystem. Anticipation seems to be high as the conference sold out in just over 24 hours, and will take place in San Francisco from April 2 – 4 this year.

Business diversification at Microsoft

The PC market could very well be permanently shrinking, thanks to the growth in smartphones and other mobile devices.

However Microsoft is a diversified business, and will try to maintain growth in its other markets, including enterprise. On the supplier side, AMD and Intel are both reducing their reliance on PC sales: AMD by focusing on console chips and Intel as the primary chip maker for Windows mobile devices. Even with the uncertainty, a refresh in Windows can still be a boost to all big players in the PC sector.

 

(Written by Chris Lau, a Kapitall Contributor. Disclosure: Author has a long position in AMD.)

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