Two of the Dow Jones Industrial Average's (DJINDICES:^DJI) tech components, Microsoft (NASDAQ:MSFT) and Intel (NASDAQ:INTC), could get a boost from the end of Windows XP. Microsoft officially ended support for the operating system on Tuesday, and while this was far from a surprise, it could pad both companies' sales in the coming months -- that is, unless a new Google (NASDAQ:GOOG)(NASDAQ:GOOGL) initiative proves successful.
A surprising number of PCs still run Windows XP
After 12 years, Microsoft finally pulled the plug on Windows XP. PCs running the operating system still work, but Microsoft is unwilling to offer tech support, nor will it update Windows XP for any security threats that may develop in the future.
A shocking number of devices still run Windows XP -- by some estimates, more than a quarter of traditional PCs. There's no guarantee that they'll all be updated to use a new OS, but without Microsoft's support, owners -- particularly business users -- are heavily incentivized to make the switch.
Could an upgrade cycle boost Microsoft and Intel?
Upgrading PCs that still feature Windows XP to newer versions of Microsoft's Windows operating system would bring in more revenue for the Redmond, Wash.-based tech giant. Or the computers could be replaced outright with new machines, almost certainly boosting Intel and Microsoft sales in the process.
The vast majority of traditional PCs are powered by Intel's chips; if owners of ancient XP machines upgrade to newer models, they'll more than likely buy Intel-powered machines. Last year, an analyst at Piper Jaffray raised his rating on Intel to neutral, citing -- among other things -- the end of Windows XP as a reason to own the chipmaker's shares.
Microsoft has been encouraging Windows XP holdouts to upgrade for some time, so the boost in sales resulting from the end of that operating system could already be factored into the shares of both Dow Jones components. But given the large number of stragglers -- the Dutch government, for example, is paying Microsoft millions for an extra year of special XP treatment -- a positive uptick in sales could benefit Microsoft and Intel's earnings results for several quarters.
Google hopes to exploit the disruption
Of course, there's no guarantee that owners of Windows XP-powered systems will buy new PCs that feature Intel's chips and Microsoft's Windows. Some might be tempted to purchase a device dependent on a different platform, perhaps a Chromebook -- the low-cost laptop powered by Google's Web-dependent Chrome OS.
Google is offering temporary discounts on Chromebooks for business users who are exiting Windows XP. While Chromebooks offer limited functionality, they're incredibly cheap and have seen strong growth. They're also largely impervious to traditional viruses -- a sharp contrast to the Windows XP machines they'd be replacing. For some businesses, Google's offer could prove enticing, ultimately leading them away from the traditional PC platform long controlled by Microsoft and Intel.
Ultimately, it's clear that the end of Windows XP presents a massive opportunity. The question is which companies are best positioned to exploit this development.