Once again, Microsoft (MSFT) is trying to revolutionize the world of operating systems with the launch of Windows 8. Released across 140 countries at the same time, Windows Version 8 is totally different from the previous versions of Windows OS. The new OS is designed for touchscreens, with squares replacing icons that have been a part of the Windows OS since 1995. Additionally, the new operating system will work on both computers and tablets.
Interestingly though, with all these new features announced, Microsoft is not just looking at consolidating itself as a global leader in operating systems for personal computers (Windows is used by more than 90% of desktops and laptops in the world), but also the market of smartphones and tablets, which is currently dominated by Apple (AAPL) and Google (GOOG).
Across the world, there are about 1 billion desktops and laptops that use Microsoft OS and it already represents a huge market for Windows 8, but to tread into the market of tablets and smartphones is a very ambitious goal.
As we all know, the market of information technology is very dynamic, and any differences between product launches can dramatically change their position. This is evident in the recent case of Google, which surpassed Microsoft in market value, and became the world's second most valuable public company in the technology sector.
Without a shadow of a doubt, Windows 8 is revolutionary. It brings a new vision of reality from Microsoft. The company sees the future not in desktops and laptops, but in tablets, hybrids and laptops. Of the 55 computers advertised by manufacturers, 39 are notebooks (including models already with touchscreens), seven are tablets or hybrids, four are "all-in-ones" and only five are desktops. Microsoft says that in just four weeks from the launch date of Windows 8, there will be 60 new products.
Thus, we can conclude that Microsoft envisions a brave new world. A world where portability is part of everyday life and Microsoft does not want to stay out of it. On the contrary, the heavy betting on Microsoft Surface and Windows 8 indicate that the company is willing to enter the portable market with force. Some may say that this is a risky strategy because desktops are still a part of the lives of billions of people, but Microsoft is not ignoring these people. I can clearly see that the company is just expanding its range of options due to the emergence of new mobile devices.
Of the 140 countries in which Microsoft released Windows 8, the majority comprises of developing countries that are only now beginning to consume mobile devices voraciously. If we consider the potential of these growth markets such as the BRIC countries, the possibilities are endless. The countries that form the BRIC group represent almost 1/3 of the population of humanity and an increasing number of people in these countries belong to the middle class. This new middle class has a tendency to consume a lot of new products and Microsoft is entering these markets unlike Apple, which favors developed countries before emerging ones.
Apple does market its products well in China, India and Brazil but Microsoft remains more popular in these countries. By appealing to the middle class in BRIC nations, Microsoft has already established itself as a leader in not only personal computers, but also mobile devices and tablets. Windows 8-running Lumia, by Nokia (NOK), is very popular in India. India has historically been a large consumer of Nokia and Microsoft products. Google and Apple remain particularly unpopular in that country, as they are perceived to be "expensive." Clearly, Microsoft has nailed economies like that of India's by launching a well furbished, future proof operating system like Windows 8.
Meanwhile Apple continues to be successful with its iPhone 5 and the recent iPad mini. However, Apple sold fewer iPads than expected, as the economy remained weak and consumers prefer to wait for the launch of the iPad mini with 4G, which hits stores later in November. Apple is the most valuable technology company in the world, whose shares in the market flirted with prices below $600 for the first time since August. In the previous quarter, its revenue had been below market expectations.
Google already faces problems in Brazil due to a historic decision of Brazilian newspapers to leave Google News. The National Newspaper Association (ANJ), which represents about 90% of the newspapers in circulation in Brazil, recommended that its 154 newspapers members leave Google News. This could act as a precedent for similar directives in other parts of the world. On the other hand, Google is innovating once again by creating a service that plans to deliver purchases sold by partner companies in the same day to the consumer.
On the other hand, Amazon (AMZN) has been struggling to compete with Apple's iPad lately. Most people that I know prefer using an iPad over a Kindle Fire. This opinion can change if Amazon markets its Kindle Fire more aggressively in countries like India, China and Brazil, where a tablet is synonymous with iPads.
Meanwhile, it is interesting to notice that the market cap of Microsoft is $237.43 billion and the enterprise value is $183.73 billion, which suggest that Microsoft is still a very big company that cannot be easily ignored. The company's profit margin is 21.71% and the operating margin is 36.02%. This is very good news for investors who are looking at Microsoft as a long-term investment. The total cash is $66.07 billion, but the total debt is $12.37 billion. The debt might seem like a huge number, but with the launch of Windows 8 and the new Surface RT, this deficit can be easily reduced. The operating cash flow is $31.62 billion, which leaves the company with a lot of money to spend. It is too early to say whether Windows 8 will be a sales success and as critical as Windows 7, but one thing is certain: the efforts that Microsoft has made to launch the new products are great, especially in countries where markets are overheated. Surely, these steps will not go unnoticed by the financial market. I expect above average price appreciation between now and early 2013.