On Thursday, Oct. 22, Microsoft (MSFT) unveiled the latest iteration of its operating system, Windows 7.  Several years ago, the Redmond, Washington software giant released its Vista OS with a lot of fanfare.  Unfortunately for Bill Gates and the millions of MSFT shareholders, Vista was a complete bust.  To prevent a repeat of the Vista debacle, Microsoft took some serious steps to make sure Windows 7 actually works as advertised.  The last thing the company needs is for its latest OS to be the same kind of dog Vista turned out to be.  

So far, Windows 7 beta testers have given the OS rave reviews.  Nearly all the reviews in the tech publications and blogs have been positive, and so has the feedback from the ChangeWave Alliance Research Network.  According to March 2009 survey of Windows 7 beta testers, satisfaction ratings were far superior to the satisfaction ratings of Vista.

The survey found that nearly half (44%) of beta testers said their company was very satisfied with Windows 7. By comparison, in a February 2007 survey taken just after Vista’s release, only 10% of respondents said they were very satisfied with that version of Microsoft’s OS. The positive publicity generated by Windows 7, and the anticipation surrounding this new OS is certain to have positive ramifications not only for Microsoft, but for the entire PC industry.

The Windows 7 Effect

According to a ChangeWave consumer PC survey conducted in early October, planned computer buying going forward has jumped to its highest level in nearly two years.  Moreover, the survey found more than a 15% increase in projected demand over the past month.

When those who said they planned to buy a new PC were asked which operating system they want installed on the computer they’re buying, nearly two-thirds (63%) chose Windows 7. That figure is a full 14 points higher than in a September survey, indicating that the positive word regarding Windows 7 is definitely out there. This is good news for PC makers like Dell (DELL) and Hewlett-Packard (HPQ) going forward.  Of course, it’s also great for Microsoft.  

But just how strong has consumer demand for PCs been over the past 90 days, and what does that demand look like for the next 90 days?

Dell and HP Should Benefit

According to the research, Dell should prove to be one of the biggest beneficiaries of the Windows 7 upgrade cycle. The past 90 days have not been good for Dell, however. In fact, fewer consumers appear willing to be the last ones to buy Dell laptops or desktops that feature the Vista OS. Only 17% say they’ve purchased a Dell laptop, and 24% a desktop, over the past 90 days.  Both of those respective numbers are down significantly form the previous survey.  

At this point, we have yet to pick-up the expected surge in momentum for Dell, with planned desktop and laptop purchases both slightly lower than in the previous survey.  Clearly, many consumers are waiting for the Windows 7 release, but now that the product is out, it will be interesting to see what the first few weeks of Dell’s PC sales look like.

On the corporate front, which makes up 80% of Dell’s PC business, the company has shown strength for two-consecutive ChangeWave Alliance IT spending surveys.  Here again, the strength going forward on the corporate side of the ledger is likely due to the pending Windows 7 upgrade cycle.  The bottom line here for Dell is that the company is well positioned to benefit from overall growth in the PC market, as the Windows 7 wave builds momentum.

As for Hewlett-Packard, the company experienced strong market share gains among respondents for both desktops and laptops over the past 90 days. Looking ahead to planned purchases of HP desktops and laptops, we have a slight drop going forward. This weakness is also likely related to consumers waiting for the release of Windows 7. Once again, now that the new OS has been rolled out, I expect to see buying momentum in Dell and HP surge, and that is going to be great for Microsoft sales.

On Friday, Oct. 23, we’ll find out how well Microsoft did in its most recent quarter,  But whatever the earnings data reveals, the real test for the software giant will be the outlook in the fourth quarter, and the type of buzz Microsoft’s new operating system generates in the weeks ahead.  If all goes well, Windows 7 could be the prompt that boots up Microsoft shares — as well as the entire PC market.
NOTE:  At the time of this writing, Jim Woods did not own shares of DELL, HPQ or MSFT.

• What Are Twitter, Facebook and MySpace Really Worth?
  
• 5 Health Care Stocks to Buy Now
  
• China Mobile (CHL) on a Path for Growth