As Microsoft (MSFT) Sales Improve, Can A PC Rally Be Far Behind?

Investing

Published: July 3, 2007 4:52 am

The Vista train may be pulling out of the station. After checking a number of software sales indicators, an analyst quoted in Barron’s says that Microsoft (MSFT) OS sales should handily exceed expectations in second half of the year.

Since Vista was first released in beta, Wall St. has harbored a "domino theory" about the effect that the new software will have on the broader tech industry. As sales of Vista begin to spike up, PC demand will rise sharply. Companies including Dell (DELL) and HP (HPQ) will benefit from the new unit shipments.

As the PC domino falls, the large chip-makers will begin to see improvement in their sales. Intel (INTC) and AMD (AMD) benefit within a quarter or two of Vista’s success.

After that, tech integration companies like EDS (EDS) and Accenture (ACN) will be called in to integrate Vista and Microsoft’s new server software throughout the tech infrastructure of large enterprises.

The Achilles heel in all of this is that rumors of improved Vista sales have been around since the beginning of the year. MSFT CEO Steve Ballmer threw cold water on the idea that the software was flying off the shelves. Analysts looking for a big short-term profit in the stock got burned.

Burned once, shame on me. After that, it’s all your fault.

Douglas A. McIntyre can be reached at [email protected].

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