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Windows 7 to Let Fresh Air Into Tech Sector

Microsoft will launch Windows 7 this week, but other tech stocks could also feel the upside.

REDMOND, Wash. (

TheStreet

) --

Microsoft's

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new

Windows 7

operating system will make its debut in a frenzy of marketing hype Thursday, although the upside potential extends well beyond the Pacific Northwest.

The successor to the widely criticized, difficult-to-deploy Vista operating system, Windows 7 has been

touted

by Microsoft as its best PC operating system ever.

Hyperbole aside, the OS is set to make its presence felt right across the tech sector as Microsoft partners and rivals weigh opportunities and a fresh competitive challenge.

"It's good for anyone in the PC food chain, particularly hardware vendors, and manufacturers of memory, chips and drives," Katherine Egbert, software analyst at Jefferies & Company, told

TheStreet

. Other beneficiaries include software companies with close links to Microsoft such as

Citrix

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(CTXS) - Get Citrix Systems, Inc. Report

and anti-virus companies like

Symantec

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and

McAfee

(MFE)

, she added.

Windows 7 clearly presents great opportunities for Microsoft and its buddies. With many companies steering clear of Vista, Egbert says that some 75% of corporate users are still running Windows XP, which is now 8 years old. Cue a major Windows 7 upgrade.

"The enterprise upgrade cycle will start in mid- to late 2010," she said, explaining that Microsoft will only support XP until April 2014. "Typically, companies will wait for the first

Windows 7 service pack to be released."

This could spell good news for PC makers like

Hewlett-Packard

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and

Dell

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, as well as component manufacturers such as Intel,

Samsung

and

Seagate

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. During Intel's third-quarter results last week, CEO Paul Otellini said that many companies are already laying the foundations for a Windows 7 deployment.

"I would expect that that evaluation process will happen over the rest of this year and we'll start seeing corporate purchases on a refresh basis begin in 2010," he said. "We see a lot of interest in corporations around Win 7 and the new Nehalem-based

Intel processors, which are sort of made for each other in terms of the performance and power management and security characteristics."

In the consumer market, which is driven by netbook sales, Otellini said that Microsoft partners are already offering coupons for free Windows 7 upgrades.

Citing enhanced security, compliance features, and ease of use, Microsoft has been pushing Windows 7 as a way for firms to shave their IT budgets. Faced with stiff competition from Linux specialists

Red Hat

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and

Novell

(NOVL)

, as well as

Apple's

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Mac OS, the stakes are high for the new operating system.

Last week, for example,

BusinessWeek

reported that Apple will launch ads in response to the Windows 7 launch, depicting the Mac as a superior technology. Apple recently unveiled the latest version of its own Mac OS, dubbed

Snow Leopard

, and is locked in a fierce

software war

with Microsoft.

At least one analyst, however, feels that Windows 7 could actually provide a boost for Apple.

"We have concluded that no negative correlation exists on Apple's hardware sales when Microsoft launches a new OS," wrote Brian Marshall, an analyst at Broadpoint AmTech, in a note released last week. "Ironically, we believe new OS launches may have even acted as a 'delayed accelerant' to Apple's computing sales."

Marshall, who examined the impact of four major Microsoft OS launches, including Vista and XP, concluded that Apple itself is the biggest factor in its own success. Regardless of Windows 7, the consumer tech giant could potentially double its computer share from just under 4% to 8% over the next five years, he added.

As for Microsoft, all the signs suggest that the software giant has learnt the lessons of Vista.

"The hardware system requirements are not the obstacle that they were for Vista," Dean Williams, services development manager at integration specialist

Softchoice

told

TheStreet

. "When Windows Vista was released three years ago 94% of computers couldn't run it in its optimal versions."

Even the basic version of Vista was out of the reach of many users, according to Softchoice, with only 50% of computers meeting the minimum system requirements. As result, Softchoice says that the software is on just 3% of corporate PCs.

In a recent survey of 450,000 corporate PCs, Softchoice found that almost 90% meet the minimum Windows 7 requirements, and 65% can run the all-singing, all-dancing version of the software.

Initial reviews of Windows 7 have also been

positive

, and Jefferies & Company analyst Egbert feels Microsoft investors might get a pleasant surprise.

Corporate IT spending is on the rebound," she wrote, in a note. "And it now looks like the Windows 7 cycle is going to be bigger and quicker than most estimates."

Egbert, who changed her Microsoft price target from $29 to $30, also raised her fiscal 2011 estimates for the software maker ahead of Thursday's launch.

Next: Microsoft's Hard Slog in Hardware

-- Reported by James Rogers in New York