Renewal of The PC Industry with Microsoft's Windows 7

Sales resulting from Windows 7 in the first week after its launch last month got the better of Vista sales during the first week after its launch in January 2007 by 234%, based on a report from industry research firm NPD. Microsoft has certainly given the nod to the rumors that the operating system is doing well, but now it no longer appears to be an empty boast. The issue that the PC industry, which has been caught in a fix, needs to have dealt is whether Windows 7 sales will help revive the purchase for laptops and desktops. Also, companies and consumers could be purchasing the software and loading it onto the aging computers.

Most of the early reports show that Windows 7 should produce a relatively sharp surge in computer sales in the fourth quarter. Industry group Gartner expected PC units shipped worldwide to drop 5% in the third quarter. Sales were actually up about a percent which was better than expected to almost 81 million units. It was believed that falling PC prices and the surge in the sales of net books, which often cost less than $300 each, helped drive demand. The firms that performed best in the previous quarter were Hewlett-Packard (NYSE:HPQ), Apple (NASDAQ:AAPL), and Acer. These three companies are unusual because there is no pattern in pricing among the three companies. Apple PCs are normally at the highest end of the price range, HP in the middle, and Acer at the bottom. The recovery is widely-spread, in other words, and not restricted to a single portion of the industry.

The new Windows 7 was being pre-sold in the third quarter, this probably helped move PCs, but it is likely now that it is accessible to buyers immediately with each PC purchase, so that Windows should do a lot more to support a recovery in the computer industry. The Windows 7 got good reviews and the fact that a number of businesses and consumers want to get the Vista off their machines should accelerate the demand for new software on which Windows 7 is loaded.

PC sales may also be boosted by the normal replacement cycle which was thrown off by the recession. The normal computer is probably older than it has been at any time in the last decade. PC prices are sinking. That is good news in general. Two forces are driving replacement and not just a single one. But something is not certain and that is whether the rush to get Windows 7 will encourage all PC companies the same or whether some will do a lot good than others as the industry improves. Dell (NASDAQ:DELL) will continue to do bad, if recent history is any indication. The company has still not surprised many by manufacturing models that the public finds hold up well next to HP products and Apple Macs. Acer and Lenovo have improvised on their computers and seem to have the advantage of low cost labor. Mac sales in particular should be grabbing market share from Dell. Apple’s most recent quarterly earnings reveals that Mac sales are actually accelerating. Microsoft’s earnings should be a lot better than predicted in upcoming quarters.