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Microsoft Corporation (NASDAQ:MSFT) Windows 10 Is The Next Sell Signal

Microsoft Corporation (MSFT)

Microsoft Corporation shares fell strongly after the firm revealed its earnings for the June quarter, but the pain may not be over for the firm. Heading into the release of Windows 10, which will be made available on July 29, some on Wall Street feel that the firm has further to fall before turning around.

Microsoft NASDAQ:MSFT

Windows 10 is much needed by Microsoft after the PR problems caused by the firm’s release of Windows 8, but that doesn’t mean it’s going to be a boon to investors. Heather Bellini of Goldman Sachs says that Windows will get in the way of growth at Microsoft rather than improve it. She thinks her clients should Sell their shares in the firm.

Windows 10 hurts Microsoft

Most users will be able to upgrade to Windows 10 for free once it is made available. That means that Microsoft won’t see much in the way of OS license fees for the first few months after launch. On top of that, the release of the new OS might actually hurt the sales of PCs across the globe.

Gartner analyst Ranjit Atwal, in a recent report on the PC market, says “The release of Windows 10 on 29th July will contribute to a slowing professional demand for mobile PCs and premium ultramobiles in 2015, as lifetimes extend by three months.”

Last year, after Microsoft cut support for Windows XP, there was a rush for customers to upgrade their PCs, and that’s not going to happen this time around. With so many users jumping in to Windows 8, Microsoft is unlikely to see business getting on board with Windows 10 too quickly. That’s not where the problems with Windows 10 end.

Sell Windows 10 if it’s too successful

Microsoft Corporation CEO Satya Nadella has made his position on the firm’s hardware business less than clear. Though he wrote $7.6B off of the value of Nokia and fired much of the firm’s hardware employees, he says that phones and tablets are still going to come out of Redmond.

Those with Microsoft shares are looking for growth in the cloud business and in commercial licensing. They don’t want to see growth in hardware, because it distracts from the high-margin segment that sells software to business.

Walter Pritchard and Steven Rogers, who research Microsoft for Citigroup, reckon that success for Windows 10 could be a big problem for Microsoft. The analysts think that if Satya Nadella sees demand for devices running the software he may seek to invest in hardware, lowering growth across the firm.

Pritchard has a Sell rating on stock in Microsoft . In a report published on July 22 after the firm’s earnings hit, he put a price target of $38 on the firm’s shares.

It’s still Windows 10, in his view, that it going to hurt Microsoft. The “company may be outgrowing its peers in enterprise, but this still comes with cost of subsidizing this growth through consumer investments that are likely to drag on for some time” he wrote.

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