Windows 7: Now It's an Economic Savior Too

Expectations for Windows 7 may be getting a bit out of hand.

It’s one thing to expect Windows 7 to juice a PC upgrade cycle, Microsoft’s (MSFT) earnings and tech industry growth. It’s quite another to think that Windows 7 is going to move the needle on gross domestic product.

Yes folks, Windows 7 is now an economic savior. No pressure there Steve Ballmer.

Also see: Most popular Windows 7 content

• Ed Bott’s Windows 7 reviews and analysis
• Mary Jo Foley on Windows 7 developments

In a Bloomberg Radio interview John Herrmann of economic research outfit Herrmann Forecasting was riffing on how GDP would bounce back in the second half even as consumers were saving—not spending—money. The radio host, Tom Keene, called it Herrmann’s conundrum. For financial wonks the conversation was interesting fodder.

But my jaw dropped when Herrmann said a chunk of his GDP expectations for the second half was based on Windows 7. Microsoft will juice capital expenditures and that’ll propel GDP. I don’t recall Herrmann putting a figure on Windows 7—like it’ll be responsible for 1 percent of GDP or anything—but the concept struck me as absolutely nuts.

Yes, consumers may go out and buy new PCs. Yes, companies that haven’t upgraded PCs for five years are waiting for Windows 7. But c’mon. Is an operating system really going to move the U.S. economy? Perhaps it’s time for a new mantra: What’s good for Microsoft is good for the U.S.? After all, something has to replace GM in the slogan department.

The real news is that the launch of Windows 7 is clearly reaching its ridiculous expectations stage. Analysts have been arguing that Windows 7 will unleash pent-up hardware demand. For instance, Deutsche Bank analyst Todd Raker wrote in a research note:

This is the first OS that does not require higher end hardware and processors on the PC. This is significant as it will allow legacy Vista PCs to be upgraded to Windows 7. This should add $500m to $1b in incremental revenue if an additional 1%-2% of the installed base upgrades to Win 7 without purchasing new PCs. In addition, we believe the traditional hardware refresh cycle will be stronger than typical given the aging base of PCs and pent-up demand from lackluster Vista adoption. We estimate this will add $400m in revenue for Microsoft in F2010.

I agree with most of Raker’s take, but the U.S. has an annual GDP of $14.29 trillion, according to the CIA Factbook. Windows 7 will have to move a lot more than just a hardware cycle to move the U.S. economy. Now if Windows 7 can cure cancer too perhaps Herrmann has an argument.

Comments

[Dave Wrixon:]

Might be hit the self-destruct button in the EU.

Playing chicken with the Commission is probably not the best way to go!

Jun 29 03:06 PM

[LilBob:]

Windows 7 won't move anything if it continues the Vista trend of limiting access to the system file tree and making it difficult to install anything but the latest version of a software program. If Windows 7 doesn't reverse the Vista trend and return to a Windows 98/2000/XP file access and management system then it's going to be a huge flop. I also wouldn't put too much faith in any new versions of Microsoft Office with so many people making the OpenOffice 3.0 transition. Who in their right mind is going to pay $700 for a license for every computer in their office when an OO3.0 commercial services agreement can be purchased for around $40/machine/year.

Jun 29 11:40 PM

[Homer II:]

..and I'll bet you that W7 will fall flat on their collective face as bad or worse than Vista did. M$ is a dying skeleton of their past greatness. They absolutely suck at OS design and maintenance. Their best developers have mostly moved on; they innovate NOTHING: they simply plagarize and let their lawyer machine handle the patent violations; or buy new concepts from smaller firms who have some vision.

Jun 30 01:23 AM

[Moon Kil Woong:]

Hmmmm it's hard to be worse than Vista very, very, very hard. Microsoft may think they are the leaders of the tech revolution but they have, for a long time been nothing but a hinderance. Don't depend on them for innovation.

Jun 30 05:06 AM

[jayminho:]

oh well, bill saved US once in the 80s , why cant he do it again? britney did.

Jun 30 09:13 AM

[buoy:]

Vista was supposed to be the best thing since sliced bread. This time I'll wait for 7 to prove itself.

Jun 30 08:43 PM

[Tom B:]

The most generous praise I've heard of Win 7 is that it gets Windows back to pre-Vista (that is, XP) levels of performance and adds some eye candy. That's a pretty low bar; hardly worth opening the champagne cork over. It could LOWER PC sales, in fact, if system requirements are genuinely more modest.

In contrast, every other commercial OS (that is, OS X and the various LINUX distros) is UNIX based, thus, very secure; modern; capable of multitasking without choking; and high-performance. I might argue that retiring Windows completely is the most effective way to juice GDP-- by double digits-- by improving per capita productivity and slashing support costs.

Jul 01 02:33 PM