Microsoft Needs Heavy Marketing For Windows 8 Devices

Oct.24.12 | About: Microsoft Corporation (MSFT)

As one of the largest technology companies in the world, Microsoft (NASDAQ:MSFT) keeps losing its influence with consumers. As smart phones and tablets take the place of desktops and laptops, Microsoft is having trouble staying relevant for consumers. The company's enterprise segment (i.e., the segment that provides services and products to companies) performs much better than its consumer segment (i.e., the segment that provides services and products to individuals). The company needs to perform significantly better on the consumer side if it wants to stay as a major player and compete with likes of Apple.

Between now and early 2013, Microsoft will need to launch a huge marketing campaign in order to educate consumers about Windows 8 devices, especially the smart phones and tablets. Without such an effort, the company might end up losing money on Windows 8.

There will be 2 versions of Windows 8. One of these versions will require a higher CPU power than the other. The first version will be mainly in PCs and the second version will mainly go to tablets and smart phones. The two versions of the operating system will be almost identical and they will be able to run the exact same applications. This is indeed good for Windows Phone makers such as Nokia (NYSE:NOK) and Samsung, because iOS (NASDAQ:AAPL) and Android (NASDAQ:GOOG) have always enjoyed much larger libraries of applications than the Windows Phone operating system. This has been working against the Windows Phone operating system like a double edge sword: very few developers create applications for the Windows Phone operating system because very few users actually use it; similarly very few people buy Windows Phones because there aren't enough applications which could run with it. When Windows PCs and Windows Phones share applications, this will increase the number of available applications exponentially, which should result in more demand for both versions of the operating system.

Still, Microsoft can't take its chances. For a long time, the company kept saying that Windows 8 was its biggest investment ever since Windows 95. When the Windows 95 was released in August of 1995, the operating system sold so well that Microsoft's market value increased from $50 billion to $67 billion within one year, and it increased all the way to $235 billion within 3 years of this release. In fact, 3 years after the release of Windows 95, the company's market value was very close to what it is today excluding the inflation (keep in mind that a portion of the huge market appreciation was in fact due to the tech bubble going on at the time). In the last decade, a lot of the long term investors of Microsoft have been very frustrated with the company because their investment resulted in very limited returns with the exception of relatively generous dividends.

This may be one of the last chances of Microsoft to improve its image in front of its patient investors who have been waiting for returns on their investments. Microsoft really can't afford to miss on this one, because if Windows Phone fails, this will drag some of Microsoft's biggest partners, such as Nokia, with it, which means Microsoft's chances of gaining any market share with the Windows Phone operating system will diminish significantly. Microsoft only gets one shot at stealing market share from Apple and Google. If Windows Phone operating system fails, the hardware companies will stop building phones for it, and it is highly doubtful that Microsoft itself can build a successful smart phone. The company's simply doesn't have experience or expertise in building phones. Of course, it could always acquire Nokia and go from there, but it might be too late by then.

A few months ago when Steve Ballmer, the CEO of Microsoft, declared war on Apple, he said that the company wouldn't be shy about throwing everything it has on this war. The company would spend all of its resources if necessary, and it would leave no stone unturned. This is Microsoft's one and only chance at gaining significant market share in smart phones and tablets. I really hope that the company pushes Windows 8 with all the marketing power that it currently has. Exceptionally strong marketing is what made Apple so successful in the last decade.

In order for the marketing efforts to be successful, these efforts will have to be coordinated with Microsoft's partners. Nokia, Samsung, HTC, AT&T (NYSE:T), Verizon (NYSE:VZ) and all other parties should join forces to make this a successful marketing campaign. From the way Steve Ballmer speaks, it looks like he is well-aware of the importance of Windows 8. In fact, he has called Windows 8 the most important thing the company has ever done. I believe that Microsoft will be very serious about pushing Windows 8 products in the market and do everything it can to maximize the market exposure of these products.

What if Windows 8 fails to gain attention of consumers? Does that mean Microsoft will cease to exist? I highly doubt that Microsoft will be in that position. If the whole deal with Windows 8 fails, the company will continue its operations, but it will have to get smaller. The company will probably have to focus on the enterprise segment and forget about consumer segment. The company's enterprise segment is profitable enough for Microsoft to stay afloat for decades; however, it may not fuel much growth for the company. At the end of the day, if the introduction of Windows 8 fails, we will see a still-profitable but much smaller Microsoft for years to come.

For Microsoft's growth story to remain intact, the company has to capture attention of consumers, and at this point, the only thing that can ruin Microsoft's efforts is bad marketing. Hopefully Microsoft will do a great job in marketing Windows 8, which will be good for not only Microsoft, but also for its partners such as Nokia.

I am long Microsoft because I believe that the company can pull this off with all the resources and experience it has.

Disclosure: I am long MSFT, NOK. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.