Microsoft

(MSFT) - Get Report

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.

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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.

Of course it can be difficult to warm to Microsoft. The stock went nowhere for six straight years, capped off that performance with a brief spike, and then followed it with a 43% fall last year.

The software giant has struggled to expand beyond its dominant PC software franchise. Microsoft has been limited to a toehold in the Internet market. That Net frustration led to a bold plan by CEO

Steve Ballmer

and the failed year-long

Yahoo!

(YHOO)

takeover fiasco.

Microsoft has also been losing its grip on the smartphone market as challengers like

Research In Motion

(RIMM)

and

Apple

(AAPL) - Get Report

stepped up with compelling devices and attractive software.

However, there is a glimmer of recovery ahead for Microsoft in smartphones.

Motorola

(MOT)

, the No. 5 phone maker, said it was building new phones this year on

Google's

(GOOG) - Get Report

Android system and

vowed

to go with Windows 7 in 2010.

This suggests that Microsoft will have a mobile version of its Windows 7 system, which holds some added promise as smartphones continue to look like the next iteration of PCs.

Also, in a odd twist, the fast rising netbook segment of the PC market, which threatens giants like

Dell

(DELL) - Get Report

and

Hewlett-Packard

(HPQ) - Get Report

, could be an added boon to Microsoft.

As it turned out, Vista was such a disaster that it helped fuel the red-hot movement in netbooks -- stripped-down laptops running on anything but Vista. The majority of these netbooks run on Windows XP, and as a result, those computers become another upgrade opportunity for Windows 7.

From an investment standpoint, it's a bit of a gamble to assume Windows 7 will fully succeed where Vista failed, but the bar is low enough that Microsoft has a chance to clear it.