>MICROSOFT CORPORATION: “Windows 8 – It’s Alive” (Positive Assessment of Windows 8 Consumer Preview)

No Surprises, Consumer Preview Looked Solid


■ First take on Windows 8 Consumer Preview
We attended Microsoft’s Consumer Preview of Windows 8 at the Mobile World Congress in Barcelona. The product looked very stable. It was running live and with live apps from the app store. The User Interface has been finished and the fit and finish looked very good. We liked the ability to use touch together with the mouse and keyboard in any combination to permit users to have the optimum experience in any of the many form factors we expect from OEM partners. The adaptation for mouse and keyboard was better than we had expected, improving the potential upgrade opportunity for notebooks and Ultrabook touch devices. We continue to expect the release to manufacturing (RTM) by August and general availability (GA) by late September or October.


■ Criticism will likely be from UI changes
The main concern may center on the difference of the overall user experience, and how jarring this change is for the end-user. Obviously, people like the touch interface of the iPad, so the fact that there is change to accommodate a new user experiences is not bad in and of itself. The issue is more how this is implemented across devices from tablets to Ultrabook touch and notebook devices, and desktops. The Windows team has made significant changes to the UI in order to optimize the experience for the introduction of touch across devices. Our assessment is that the changes are easily discoverable and enable new experiences and form factors, and while they will require users to reorient to the new interface, this is a positive end result and is well implemented across devices. Not just about competing with Apple and Android on tablets Also, in our view the key will be not just enablement of touch, but collaboration among workgroups with the new Office and integration of cloud services such as storage through SkyDrive to provide sharing of data and apps across devices. This is a big opportunity for innovation; it is not just about competing on tablets with Apple and Android. Reiterate our Buy rating on the shares and favorable valuation Still like the shares at current levels, which are trading at 10.3x our CY12 earnings estimate (ex-cash) and 9.2x EV to unlevered free cash flow.




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