After the fiasco that was the Windows 8 launch, investors in Microsoft Corporation (NASDAQ: MSFT) may be happy to see a new version of the company’s operating system appear, fresh-faced and apparently risk-free. Windows 10, Microsoft revealed on Tuesday May 13, will not shake up the world with its features, its pricing or its distribution model. It’s supposed to be a comfort to enterprise, customers and investors. That’s why shareholders should be worried.
There were major issues with Windows 8, and those issues lead to tumultuous change at Microsoft Corporation. Staya Nadella is in charge now and under his leadership there is a whole brave new world for investors to be excited about. Windows 10 could drag the company right back into the dark ages.
Windows 10 needs to fail, but not hard
Windows 10 could be a disaster for Microsoft because if adoption is high, resources may once again be diverted into the company’s Devices and Consumer Hardware division. Walter Pritchard and Steven Rogers from Citigroup warned that Microsoft’s overall business will hurt if the desktop operating system is successful.
To see a list of high yielding CDs go here.
That’s because the company’s Devices and Consumer Hardware segment carries a lower margin than the enterprise and cloud parts of the business. For that reason the analysts are looking for Microsoft management to show a soft focus on Windows 10 and concentrate on the improvements in its cloud products and enterprise services.
Whether or not Microsoft will be willing to do that remains to be seen. Windows 10 is a point of stability that the company operates around, should it fail hard the investor backlash could be grave. Success, though, could be just as bad, according to the Citigroup analysts.
Microsoft focuses on enterprise
There are some good signals around Windows 10. Microsoft revealed the different editions of the operating system on Tuesday and a free ad supported version was nowhere to be found. That means that the company is not looking to take Google Inc (NASDAQ: GOOG) head-on in the consumer tablet space.
In a blog post announcing Windows 10, Microsoft said that there will be seven editions of the OS: Windows 10 Home, Windows 10 Pro, Windows 10 Mobile, Windows 10 Enterprise, Windows 10 Iot Core, Windows 10 Education, and Windows 10 Mobile Enterprise. , who authored the blog post, said that the new system would deliver a “more personal computing experience.”
Goldman Sachs, in a note published last month, said that the offer of a free upgrade to Windows 10, which is still in the works, would slow the company’s revenue and advised readers Sell stock. Heather Bellini, who authored the note, said that the company was worth $38 per share.
If Microsoft leverages Windows 10 as a way to integrate and sell cloud and enterprise services, analysts following the company will be happy with the operating system. If it chooses to make another charge at success in consumer technology, there won’t be quite the same response.
Karl Keirstead of Deutsche Bank is excited about Microsoft because of the company’s enterprise and commercial software. In a report dated May 13 the analyst upgraded the firm to Buy based on the information and products presented at the Ignite conference. Deutsche Bank has a $55 price target on Microsoft.
His most recent report, stayed away from the possibilities of Windows 10 in order to focus on enterprise and Azure, what he sees as the core of the company’s new business.
If Citigroup’s Walter Pritchard and Steven Rogers are right, in order to grow Microsoft needs to be careful with Windows 10, and investors need to observe closely to ensure that the company isn’t going to fire another Nokia-fueled volley at consumers. Pritchard and Rogers have a price target of $37 on the firm.