Can Windows 7 Save Microsoft?

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We're now exactly two weeks away from the release of Microsoft's (Nasdaq: MSFT  ) highly anticipated -- and, quite frankly, necessary -- successor to its Vista operating system, and the company's reputation could hinge in part on its success.

Early buzz has been generally favorable for Windows 7."I believe it is the best version of Windows Microsoft has produced," influential tech columnist Walt Mossberg writes in this morning's Wall Street Journal. "It's a boost to productivity and a pleasure to use. Despite a few drawbacks, I can heartily recommend Windows 7 to mainstream consumers."

Mossberg has been historically partial to Apple (Nasdaq: AAPL  ) , so when he concludes that it's "much more of a toss-up between the two rivals" with Windows 7, that's as ringing an endorsement as one is likely to find.

Apple on the attack
I doubt the effective "I'm a Mac" ads will end, though. There are still weak spots in Windows' armor that the Cupertino giant will likely exploit: 

  • Windows 7 may be a reasonable upgrade process for Vista users, but it could be an outright chore for Windows XP users, who still make up the largest base of Microsoft-powered machines.
  • For efficiency's sake, Windows 7 doesn't ship with built-in programs for photo cataloging and video editing, contrary to what was available in earlier editions. Those extras will now be available as free downloads, but Apple can have still a field day pointing out its own candy-store of preinstalled multimedia goodies.

It's also possible that some of Windows 7's flaws will be exposed once the platform is out in the wild.

"The test feedback has been good, but the test feedback on Vista was good," CEO Steve Ballmer warned in a Bloomberg interview last week. He's certainly not the sugarcoating salesman that Steve Jobs can be, but there's nothing wrong with guarded optimism.

Ballmer knows that the battle is long, and that Windows 7 isn't perfect. He also knows that Apple will do its part to point out any weaknesses. And when Apple goes on the attack, it usually does so with great efficiency.

Buy Dell and HP
The mostly good reviews on Windows 7 may be blessings to the hardware and software companies that will rely on the operating system.

Hewlett-Packard (NYSE: HPQ  ) and especially Dell (Nasdaq: DELL  ) will be the biggest beneficiaries if the upgrade path from XP to Windows 7 is a monstrous headache. Instead of upgrading to Microsoft's new operating system, many computer owners will choose to simply back up their data files and move on to a new machine with Windows 7 installed.

The lack of preinstalled goodies should also benefit Adobe Systems (Nasdaq: ADBE  ) , Sony, and smaller software companies that make video-editing software. Even if Windows Movie Maker is just a free download away, users who never figure that out will seek out third-party solutions, as will all the folks who believe they've outgrown Microsoft's rudimentary freebies.

The times, they are a-changin'
The one reason to tread carefully if you're a Microsoft investor -- or even a potential shareholder -- is that this could be as good as it ever gets. Even if Windows 7 is the shovel that buries the ill will over Vista, it also may be Microsoft's last great operating system.

Whatever Microsoft cooks up as a successor to Windows 7 in a few years is unlikely to be as relevant. Smartphones, tablets, and netbooks are redefining the computing experience, and the browser is becoming as important as the operating system.

Even Google (Nasdaq: GOOG  ) is diving into the operating-system space. And who would be shortsighted enough to deny the evolutionary possibilities of Palm's (Nasdaq: PALM  ) webOS, or whatever Marc Andreesen is cooking up?

If cloud computing is the future, operating systems will be far more interchangeable, and far less relevant, than they are today. That would be bad news to both the "I'm a PC" guy and the premium-priced "I'm a Mac" peddler.

So look for the relief that Oct. 22 brings, and enjoy while it lasts.

Will Microsoft be less or more relevant in a few years? Chime in with your opinion in the comment box below.

Microsoft and Dell are Motley Fool Inside Value picks. Google is a Motley Fool Rule Breakers recommendation. Adobe and Apple are Motley Fool Stock Advisor picks. Try any of our Foolish newsletter services free for 30 days.

Longtime Fool contributor Rick Munarriz is gradually tiptoeing into cloud-computing apps, and he likes it. He owns no shares in any of the stocks in this story and is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.

Read/Post Comments (15) | Recommend This Article (11)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 08, 2009, at 12:06 PM, miteycasey wrote:

    We heard the say things about VIsta when it came out and performance wise Vista beats W7 in some bench marks.

    I'm not sure where the W7 gain is going to come from?

    As long as they create bloated OSes MS will suffer.

  • Report this Comment On October 08, 2009, at 12:33 PM, wyattbiker wrote:

    Fortunately for the world we have innovative companies like Google and Apple. MS has never invented anything but they are good at marketing. I moved over to the Mac OS X and can do everything Windows did and more. If you need some Windows app, you can always install Parallels and run XP concurrently with Mac OS X. I have convinced many people to switch. (Parallels makes first timers feel more comfortable) but then they find they don't use Windows as much.

  • Report this Comment On October 08, 2009, at 1:17 PM, papamaui wrote:

    I started with computers when DOS was in its prime. I'll never forget the hype over Windows ... nor will I ever forget the disappointment after disappointment and wasted hours starting with Win95! A friend finally convinced me to try the new Apple OSX ... it was stable but slow ... but soon got up to speed and it's been great ever since!

    Would I ever go back to Windows? Well, I had some miserably sick years with computer MS ... and some fantastically great years with iMac and Apple OSX ... and the 24" iMac is the finest computer I've ever had ... so why even consider going back? As long as Apple continues producing its quality products, they've got my business!

  • Report this Comment On October 08, 2009, at 1:18 PM, l3iodeez wrote:

    Im waiting to see Google's OS. Hopefully they will focus on hardware compatibility.


    Can you set up HP all-in-one devices to actually work? Because I can't get my Boss' mac to play nice with printers. HP says its Apple's fault, and Apple says its HP's. Im inclined to think its Apple's fault, since the printer works fine in Windows and Linux.

    Apple is like the kid on the playground that will not share his toys. He ends up with no friends.

  • Report this Comment On October 08, 2009, at 1:34 PM, BMFPitt wrote:

    Been using 7 on my main desktop for about 4 months now and I'm very happy with it. It seems more responsive than any previous version of windows, and other than a conflict with a version of Kaspersky it has been incredibly stable for a release candidate.

    As far as the business end, though, I think this article is right in that Microsoft's market is shifting away from its primary strength. People no longer need to upgrade a box every 2-3 years, and most of its money is made in the OEM market. I don't expect to see OSes become "irrelevant" in the face of cloud computing, but I expect that the gains to be made will become increasingly less (and less compelling as an upgrade.) All versions of windows have had some piece of hardware as a driving force to make you upgrade your machine (and hence your OS.) What will drive "Windows 8"?

  • Report this Comment On October 08, 2009, at 2:19 PM, SteveTheInvestor wrote:

    My guess is that in the next decade, the OS will be more of commodity than it is now. Computers of one kind or another will be everywhere and they will receive much of their data from the cloud. People are already starting to realize that they don't have to use Microsoft products anymore if they don't want to.

    Microsoft still has a grip on the enterprise because the enterprise is afraid to do anything else. But over time, I think that even the enterprise will begin to look at alternatives.

  • Report this Comment On October 08, 2009, at 2:33 PM, miteycasey wrote:

    What will drive "Windows 8"?

    Everything that was suppose to be in Vista and Windows 7 that they couldn't develop with in the current time line.

  • Report this Comment On October 08, 2009, at 2:42 PM, daveshouston wrote:

    Well let's see now. Hmmmm. Microsoft's primary customer is the business enterprise. That's where they own the lion's share of the computer market.

    Vista's been out for about three years and the latest report showed less than a 10% adoption rate for Vista in the enterprise. The rest of those customers are still running XP which is very very very long of tooth. It's not just old, it's ancient. Hmmmmm. source:

    Many of them paid $$$$ for the Vista upgrade but then reversed course and reinstalled XP. Vista just didn't run well on their old machines, drivers didn't work, etc.

    At least there was an upgrade path from XP to Vista.

    Now these customers are being asked to buy Vista again (renamed Windows 7 with some additional stuff added most of which was copied from Apple). This time they're being promised that it is fixed and really will work. But alas, there is no upgrade path for the 90%+ of their computers that now run XP. Hmmmmmm.

    "Buy new computers for everyone with Win7 preinstalled!" you say. That solves the 'no upgrade path problem' but wait a minute. Don't these enterprise customers have lots and lots of computers that would need upgrading? Aren't we in a deep recession? Does Windows 7 add some magical money making functionality that will pay off quickly for corporate America? Or is this just another rat hole for companies to pour money down?

    So now Vista has less than 10% and XP has 90% plus of this enterprise market.

    Any of you fools want to place a bet that Microsoft will be able to move a really significant portion of their Enterprise user base onto Win7 within the next year or two? (By really significant I mean 30, 40, 50, 60, 70 percent of these users). If so, how can I contact you to finalize the bet?

    And so what if they can't do that? Where does that leave Microsoft? It means that most of their customers are running ten years behind Apple. It means that there is a fancy new PC in the showroom but it isn't out in the factory on the employee's desk. It means that Apple will have to find an older man to play the part of the PC in their "I'm a Mac, I'm a PC" ads.

  • Report this Comment On October 08, 2009, at 2:45 PM, Rajaha wrote:

    I have had several PCs and a couple of Macs for years; and after having Win7 for a while now, I still like OSX better.

    I was a little unfortunate to buy an iMac G5 in '06 and now stuck with Leopard - can't go beyond it. But PCs are no better - Dell/Fujitsu/HP PCs and laptops, with Intel chips and Microsoft OS have collectively screwed me up with PCs over the years - despite having 6 PCs (2 of them were bought 4 months ago), not one of them can run Win7's XP mode. With 10's of 1000's of $s invested in various PCs and software that don't run on anything beyond XP, I am stuck with XP and Win7 is as useless to me as Vista had been. At least Leopard isn't like Vista; it works great.

  • Report this Comment On October 08, 2009, at 3:07 PM, gtrplry0123 wrote:

    I spent many years working in corporate america as an IT person. It was my belief that whenever MS came up with a "new" OS it was prudent to wait a service pack or 2 before installing the new OS on a test machine 1st. Then once everything looks stable release it on to the enterprise.

    I do consulting work and when I am out there I see Windows XP/Office 2000 or 2003. I see very little of Office 2007, and that is usually a preinstall on someone's home office or small office, and literally out of the several hundred offices I have been through in the last couple of years I have not seen Vista in one of the offices.

    I myself use Mac OS for some things like music and the internet. I do not like to use MS products on the internet.. something about security holes. Linux or BSD for firewalls.

  • Report this Comment On October 08, 2009, at 3:54 PM, tgauchat wrote:

    Microsoft uses the planned obsolescence business model. Each new OS release is primarily designed to (1) "fix" problems of the previous release, and (2) "require" new computing hardware either because of new base requirements or because it is too difficult for the average consumer to upgrade the OS in-place and much easier to buy a pre-installed new PC.

  • Report this Comment On October 08, 2009, at 4:58 PM, Melaschasm wrote:

    Windows XP was the dominant operating system of the past decade, and it appears likely that Windows 7 will be the dominate OS for the next decade.

    During the months leading up to the launch of Vista, I heard lots of bad things from my IT friends. Leading up to the launch of Windows 7, I am hearing mostly good reports.

    Windows 7 will help MS's bottom line, which is why I have some money invested with them. Plus MS has a decent dividend, and plenty of cash to get through the current recession.

  • Report this Comment On October 08, 2009, at 5:45 PM, bigcat1969 wrote:

    What is interesting about Microsoft is that they have been working diligently to destroy their own brand for the last decade. Jump back 10 years and Win98 was the platform for home users and NT for business. Then came the flood of ME, 2000 and XP. Suddenly no one knew what to use and those who opted for ME and 2K found out they had made a huge mistake. ME users eventually upgraded to XP, while feeling they had been ripped off by Microsoft. 2K users finally got 2003 server and a chance to rid themselves of a buggy, virus prone OS years later. After having learned that lesson things stabilized until Vista and its Office came out. After the tepid reception these two products received, MS responded by promising to cut off all support of XP and earlier Office products.

    Now in a world with growing non-MS alternatives and an increasing emphasis on lower priced options, Microsoft comes to the table with an expensive product that is basically screaming “Buy me, I’m Vista V2, the we didn’t screw you this time OS!” and a secondary message of “If you are still using XP, God have mercy on your soul.”

    It worked with the ME-XP versions, but I question how long a Star Trek movie based strategy of every other movie, oh sorry OS, is going to suck will work for Microsoft.

  • Report this Comment On October 09, 2009, at 1:13 AM, billmichael wrote:

    I truly believe that Windows 2000 was the last "great" OS strictly due to it's simplicity and efficiency. It could use some refinements to keep up with modern hardware, however, everything beyond Win2K has become fluffy and bloated with less functionality and efficiency. Just like Office 2007 which gives you fewer features but costs way more, Windows XP and especially Windows Vista exhibit less performance in trade for more flash and balloons. Let's hope Microsoft finally woke up with W7.

  • Report this Comment On October 09, 2009, at 5:07 AM, bsdtrhodes wrote:

    As a computer user since pre-Windows 95 days, I don't see how MS is innovating anything beyond copying other products from other companies (Zune, Xbox, etc.) after they become popular in the market. Sadly, if they want to be a key player over the next ten years, they need to innovate, like Y! did, like Google did (and is doing), and many other companies. I think we should face facts, MS had it's craze in the 80s/90s and now, the only thing they can bank on is "this version crashes less."

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