Windows 8 Shows Blockbuster Potential with Tablet Focus & Major Overhaul

September 14th, 2011 by Trefis Team
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Microsoft (NASDAQ:MSFT) showcased its Windows 8 on tablets at the BUILD conference yesterday. We wrote previously about how Windows 8 will be the single most important factor to the company’s revenues next year. Yesterday Microsoft confirmed these thoughts as it has ambitiously redesigned much of Windows 8 functionality and made it more flexible in order to work on tablets and traditional desktop computers as well as sync easily with Windows Phone 7. Given the developments so far and adoption by large tablet manufacturers such as Samsung, we believe that Windows 8 could eclipse the 450 million licenses sold by Windows 7 and could prove to be a challenger to iPad’s iOS in a couple of years time.

The Windows division is one of the main revenue generators for Microsoft and accounts for about 25% of its Trefis price estimate. We currently have a $28 Trefis price estimate for Microsoft, which implies a near 10% upside to the current market price.

Windows 8 Could Gain Significant Market Share in Tablets

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In 2010 Apple launched the iPad which was a runaway hit and created a whole new market for tablets. While Microsoft and others had tried tablets before and failed, the market has matured and Microsoft has learned from its past attempts and competitors’ successes. Gartner predicts that more than 300 million tablets will be sold by 2015 presenting a nice growth opportunity for the largest OS in the world. [1]

Apple has more than 80% of the tablet market share currently with Google’s (NASDAQ:GOOG) Android coming second. HP (NYSE:HPQ) recently discontinued its Touchpad tablets and RIM’s (NASDAQ:RIMM) Blackberry Playbook has seen dismal sales. Android hasn’t seen as much success with tablets as it has with smartphones and so this leaves a window of opportunity for Microsoft to gain traction in the tablet market.

If Microsoft moves quickly, it could potentially capture a meaningful portion of the tablet market in the next couple of years. Manufacturers are looking for alternatives to Android, which could help them beat the iPad. Windows 8 will be launched for tablets as well as computers and will support both the X86 and ARM architectures.

Windows 8 will also offer better integration with Windows Phone 7, and together, they will offer a complete ecosystem just like Apple’s Mac OS X and iOS, which should make it the platform of choice for hardware manufacturers looking for a non-Apple unified solution.

With the growth in the personal computing space slowing down, tablets are the new market that offer tremendous growth potential. With Windows 8, Microsoft has a chance to capture significant market share if it can move quickly. However as analysts expect Microsoft to launch the new version in mid-2012, this gives Apple another year to make further inroads.

Check out our complete price analysis for Microsoft.

Notes:
  1. iPad to Dominate Tablet Market Until 2015, ReadWriteWeb, April 2011 [↩]