Microsoft a 'Top Pick,' Says Analyst

Despite a downturn in the PC market, a Collins Stewart analyst has raised Microsoft to the top pick among big tech stocks.
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Updated from 11:19 a.m. EDT

In tech's land of falling stocks, one analyst has picked a winner:

Microsoft

(MSFT) - Get Report

.

Despite a nasty downturn in the desktop PC segment, Collins Stewart analyst Sandeep Aggarwal has raised Microsoft to the top pick among big tech stocks.

His reason for optimism is an earlier-than-expected arrival of the Windows 7 operating system. After widespread rejection of the Windows Vista software, Microsoft has learned some lessons and has rushed development of Windows 7. This idea that there's a

post-Vista revival

has been one of Aggarwal's favorite themes.

The June or July arrival of Windows 7 -- two to three months earlier than expected -- could contribute $1.5 billion in incremental revenue for Microsoft in the first 12 months of sales, Aggarwal wrote in a note Monday. His call helped push Microsoft shares up early, but at the close they were down 13 cents, or 0.9%, to $15.15.

More than 1 billion PCs run on Windows, and most of those users balked at upgrading their computers to meet the demands of Vista. Many opted to stick with Windows XP. This trend did not help chipmaker

Intel

(INTC) - Get Report

, which now sits on a

mountain of inventory

amid a deepening PC sales collapse.

If Windows 7 lives up to its glowing early reviews -- TheStreet.com's gadget guy, Gary Krakow, found it "

lightning fast

" -- a small but significant chunk of PC users will upgrade to the new system or buy new computers running the next OS, say some analysts.

Aggarwal's also encouraged by a potential search deal with

Yahoo!

(YHOO)

and an upgrade to the Work software with Office 14 in 2010.

Microsoft needs Windows 7 to be a winner. The software company has been losing its lead in mobile operating systems with the rise of

Apple's

(AAPL) - Get Report

iPhone and

Research In Motion's

(RIMM)

BlackBerry smartphones.

Meanwhile,

Google

(GOOG) - Get Report

has continued to attack Microsoft's online strategies through Web-based applications and the support of Android a mobile phone operating system embraced by phone makers like

Motorola

(MOT)

.