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How Can 75 Million Windows 10 Download Boost Microsoft's Revenues?

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Microsoft posted on Wednesday that over 75 million users have downloaded Windows 10 to their personal computers and tablets in the first month of its release. This signifies that its program to offer free update for users running Windows 7 or Windows 8.1 on PCs or notebooks for the first year has fared well. Furthermore, it is a significant improvement on Windows 8, which sold 40 million licences in its first month. However, the question remains how Windows 10 can help Microsoft to boost its topline and bottomline. In this note, we explore how Windows 10 can boost sale of apps in the Windows store that might boost Microsoft's revenues.

See our complete analysis of Microsoft here

Installation of Windows 10 Is Propagating Sale of Ancillary Products

The Windows Operating System Division is Microsoft’s third largest and makes up 9.7% of its stock value by our estimates. However, it contributes 15.5% to Microsoft's top line. One of the primary drivers for Microsoft's Windows division is global PC sales. Approximately 65% of total Windows Division revenue comes from Windows operating systems purchased by original equipment manufacturers (OEMs) and pre-installed on their systems. According to IDC, the global PC sales continue to decline and global shipments were down by 11.8% in Q2. We believe that global PC sales will remain tepid as users continue to adopt Tablets and smartphones as alternates to satisfy their needs. Currently, we forecast that the global desktop sales will decline by 5% to 130 million and global notebook market to remain flat at 180 million units shipped in 2015.

However, because the company has offered the free Windows 10 upgrade to the existing users of Windows 7, Windows 8 and Windows 8.1, there has been widespread adoption among users. This has enabled the company to sell more apps on its app store. Windows marketing chief Yusuf Mehdi tweeted that Microsoft's store has witnessed six times more downloads per device than the previous version of Windows (i.e. Windows 8). Moreover, Xbox One users streamed 122 years’ worth of gameplay to Windows 10 PCs during the last four weeks. We believe that Microsoft is set to become the third platform behind Google's Android OS and Apple's iOS on the back of user installs. This can incentivize app development and create a sustainable and profitable ecosystem for developers and users to thrive in. This would not only improve user experience but also boost Microsoft's topline in the future.

We currently have a $44.46 price estimate for Microsoft, which is 5% above the current market price.

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