Will Windows 8 Move The Needle By January?

| About: Microsoft Corporation (MSFT)
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Early reactions to the Microsoft (NASDAQ:MSFT) Windows 8 announcement by investors, which I watched end just a half-hour ago, was a flat line. A 30 cent pop at the start of trading quickly turned into an unchanged day as CEO Steve Ballmer and his top lieutenants sold the new operating system as hard as they could.

By contrast with the recent iPad Mini event, there were few breaks for applause. The loudest came from the showing of the new Surface tablet, which gets its own roll-out this afternoon. The Windows Phone line will be shown Monday.

What Microsoft showed this morning was a single operating system that runs on PCs, tablets and phones. With the Surface, it's a tablet whose cover doubles as a keyboard. They promised full compatibility across clients and servers, across their XBox game system and SkyDrive cloud storage, as well as a fully integrated version of their Skype messaging system.

The key messaging was a difference between their view of the world and that of Apple (NASDAQ:AAPL). Apple has one operating system for desktops, laptops and servers, called OSX, and its use on servers is really quite small. Microsoft has one operating system to rule all systems, from clouds and servers to PCs, tablets and phones, with a single operating metaphor.

That metaphor, formerly called Metro, is now called Windows RT. It will now be available in tablets running Nvidia (NASDAQ:NVDA) and Qualcomm (NASDAQ:QCOM) chips, built around ARM (NASDAQ:ARMH) designs, from Asian players like Lenovo, Samsung and Asus. It's basically a Windows version of iOS, tied to a Windows App Store, and the hope is that with a wide variety of form factors it can win on backward compatibility and price against Apple and Google's (NASDAQ:GOOG) offering of Chrome and Android.

Key to this offering is that laptops and desktops built with Intel (NASDAQ:INTC) and AMD (NASDAQ:AMD) chips, built by traditional OEMs like Dell (DELL) and HP (NYSE:HPQ) will also be pushed, and Microsoft made sure to assure that a version of the old Start button is still available.

Ballmer batted clean-up in the hour-long press conference, and the early part of his talk borrowed many cadences, and even the accent, of Bill Gates. I picked up this quote:

Picture your Start screen filled with everything and everybody most important to you, the Web sites you love and the people you connect with will fill your view. Your start screen will change as things change in your world. Window 8 keeps you connected to all your 'stuff in the cloud' with almost no work on your part.

The key word from Ballmer was "immersive." Not only is Bing now the default search choice, but Microsoft is rolling out "Bing Apps" based on it. Not only is MSN still a media choice, but the company has a host of channels - that's why it's back in the news business. The Azure cloud is integrated through SkyDrive, integration with your XBox game machine is built-in, and Skype is a standard service.

The success, or failure, of Microsoft Windows 8 will be revealed by the number of "Microsoft Accounts" generated by all this - not just by the number of upgrade licenses or new devices sold. Account holders become, in essence, Microsoft people - tied to a host of Microsoft services aimed at pulling them away from anything offered by Google, Apple or anyone else.

What should be clear to investors is that the story will be told this Christmas, not next. The new devices will be sold starting at midnight tonight, and Microsoft will be flooding airwaves with commercials, as will its partners.

The numbers reported in January, and hints of those numbers to be reported anecdotally next month, during the Christmas selling season, will tell you whether to sell, hold or buy more MSFT shares.

Disclosure: I am long MSFT, INTC, GOOG, AAPL, ARMH. 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.