Windows 7 may help kickstart delayed corporate spend

SAN FRANCISCO Thu Oct 22, 2009 5:01am EDT

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SAN FRANCISCO (Reuters) - Computer makers hoping for Microsoft Corp's new Windows 7 operating system to free up a long-awaited corporate spending spree may have to wait until the second half of next year.

As the world's top software maker prepared for its biggest product launch in a decade on Thursday, analysts said PC vendors already stood to benefit from a hardware refresh cycle next year. Microsoft's new, supposedly more stable platform should serve as further impetus to upgrade aging machines.

Industry watchers say Windows 7 may also have a short-term impact on PC sales to consumers -- potentially a slight benefit to consumer-oriented players such as Hewlett-Packard and Acer Inc.

But many large businesses will look to 2010 and beyond to buy, preferring to wait and see.

"Vista was so bad that nobody moved to it," said Needham & Co analyst Richard Kugele.

"Now, with the operating system no longer being a stumbling block, you can actually deal with the hardware problem and be comfortable that the OS isn't an issue."

The expected refresh cycle that is being touted by the likes of HP and Dell Inc would likely take place regardless of Microsoft's new offering, analysts say. That's because of a pent-up need to replace old hardware -- a cycle put off as budgets shrank in the downturn.

But no one knows how robust it will be.

Research group Gartner expects commercial PC sales to rise 10 percent in 2010 and an additional 13 percent in 2011, as businesses replace 4- and 5-year-old computers. Early, positive reviews for Windows 7 should give businesses a further nudge.

As Vista ends its nearly three years of life on the shelf, only 10-15 percent of enterprises have migrated, analysts say. The rest remain on the 8-year-old Windows XP.

The entire computer food chain, from chipmakers like Intel Corp and Advanced Micro Devices to disk drive makers like Seagate Technology, stands to benefit from a robust push by companies to replace PCs.

"They have to replace these aging machines," said Gartner analyst Mikako Kitagawa, adding that Windows 7 might accelerate the upgrade cycle for corporations.

GOING UP THE FOOD CHAIN

HP's shares are up more than 30 percent this year and Dell's nearly 50 percent, as the PC market recovery takes hold and investors anticipate a bump in corporate spending on computers next year.

Goldman Sachs expects IT spending to rise 4 percent in 2010 to 320.4 million units, reversing an estimated 8 percent slide this year. It sees PC unit growth of 9 percent in 2010.

Windows 7 is getting a big welcome from PC vendors eager to forget the much-maligned Vista platform.

Acer, whose rise to No. 2 in the global PC rankings has been fueled in part by cheap netbooks, sounded an upbeat note.

"We are expecting double-digit growth (both worldwide and in the United States) in this holiday quarter," said Ray Sawall, senior manager of product marketing for Acer America.

HP, the No. 1 PC maker, said it was impressed by Microsoft's willingness to collaborate on products and ideas.

"We're very happy with Windows 7, and we're happy with the progress Microsoft has made," said Carlos Montalvo, HP's vice president of product experience.

Dell CEO Michael Dell said recently that if you buy a good new PC with Windows 7 and Office 2010, "you will love your PC again."

In the consumer market, Windows 7 should provide a marginal boost. Analysts say buyers do not prioritize operating systems while PC shopping, focusing more on hardware and price.

"I don't think people will go out and buy a new PC because they want Windows 7. It will help, but it won't be a primary factor," said Jay Chou, an analyst with research firm IDC.

While Toshiba said it expects fairly rapid adoption of Windows 7 on the consumer side, the world's 5th-largest computer maker said it will still ship laptops with the aging Windows XP to commercial customers for a while.

"We're going to be monitoring the business customers fairly closely to see how rapidly they're preparing to transition over to Windows 7," said Chris Casper, group manager of product marketing for Toshiba America Information Systems.

(Editing by Ian Geoghegan)

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