Will Windows 8 Be A Success? Staples Seems To Think So

Includes: MSFT, SPLS
by: Joseph Harry

Staples (NASDAQ:SPLS) is the largest office products supply company in the world, as well as the second largest internet retailer of office supplies. They operate in 26 countries globally, with an estimated $25 billion in sales annually. Staples recently announced plans for an upcoming launch of their "8 was easy" program, which will promote and highlight Microsoft's (NASDAQ:MSFT) upcoming Windows 8 release.

According to Staples, their program will include:

"free personalized training, free support and free startup with the purchase of any Windows 8 computer. Consumers who purchase any Windows 8 PC regularly priced $699 and above will also receive free data transfer from their old computer."

Staples will also have over 4,000 certified Microsoft advisors to assist with the launch in conjunction with Staples. Apparently these advisors will also have extensive knowledge of the new upcoming products and operating system. These Microsoft-certified Staples advisors will also help "customers with personalized one-on-one training and equip them with the knowledge necessary to use all the great new features of Windows 8."

Sound familiar? It's almost as if Microsoft is taking a page out of Apple's (NASDAQ:AAPL) successful playbook and opening up Microsoft stores. Instead of spending money on new buildings, however, they are utilizing Staples as temporary help, by not only using their already established buildings, but by also using their (Microsoft certified) labor. This may smooth along a Windows 8 release with the business community and help them make the switch with less difficulty.

This obviously helps both companies, who seem to be forming closer ties as the release date (October 26) of Microsoft's new OS gets closer. Staples UK even went so far as to perform a study they ultimately released publicly, which led to results that claim that 77 percent of Small and Medium-sized businesses (SMEs) plan to upgrade to Windows 8.

The study cites easier integration between different devices, as well as cloud computing capabilities as incentives to make the change to Windows 8. Microsoft has been planning a retail expansion for awhile now, and plans to open up numerous new stores nationwide and globally. Setting up temporary stores with companies like Staples is a cost effective and quick way of doing this to accommodate customers during the Windows 8 launch.

One thing that makes Apple superior to Microsoft is their famous stores, which provide customers with hands-on interaction with products, as well as assistance with technical issues and questions. The Apple store concept is quickly being imitated by Microsoft, who is aggressively expanding their retail outlets.

As of now Microsoft has 27 permanent stores, but plans to have 80 retail shops (permanent and temporary) open by the holidays. This hybrid strategy of having permanent stores open for customers year round, and upping the number of stores through temporary deals (like the one with Staples) at strategic times, especially around release dates and holidays, sounds like a great idea. Microsoft stores will help assist the company's brand reinvention, and should not only help Windows 8 sales, but also keep a sustainable base of Windows customers who will now have a place to go to ask questions and get help with products.

The release of Windows 8 could be a catalyst for deeply discounted Staples, who is currently amidst restructuring plans. Staples currently trades near it's 52 week low at a P/E ratio of 8.4. The $8 billion market cap company also pays a nice 4% dividend yield according to Forbes. The company appears to remain profitable and financially strong, even in currently tough economic times, but also has some flaws. One major flaw seems to be a large amount of intangible assets. Staples generates good cash flow as well, and maybe they will further establish an alliance with Microsoft which will allow them an opportunity for further growth and prosperity.

The company is currently restructuring and attempting to cut costs. Staples wants to increase its online presence and decrease its exposure in physical stores. They also want to improve revenues from non-core operations, through items such as mobile phones and tablets, and this is where Microsoft can come help with a temporary Windows 8 fix, which may end up blossoming into a more long-term relationship for both companies. Staples would most likely be a good long-term holding if bought at current valuations as well.

Disclosure: I am long MSFT. 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.