Microsoft’s Windows Phone 8 Comeback is a Multi-Year Story

Apple’s (AAPL) iPhone 5 release once again re-affirmed the company’s number 2 spot by worldwide market share, with Android in the lead. Google’s (GOOG) Android has 52% percent of the U.S. smartphone. Apple has 32%, and Microsoft’s (MSFT) Windows Phone is a distant 4% of the market, as reported by Bloomberg Business Week.

Tepid sales for WP7 since its launch restrained shares in Microsoft. Its shares are up 27.88% for the year (based on a close on September 21). Nokia shares are down 43.12%. By comparison, Apple shares are up 74.98%, and Google shares are up 40.97%.

Microsoft’s Windows Phone 7 (“WP7”) will be succeeded by WP8 on November 2. Investors expecting WP8 to be successful should lower their expectations. Nokia’s Lumia on WP8 will take time to gain traction. By comparison, Microsoft took eleven years to gain 47% market share in the gaming market. If Microsoft’s Xbox strategy is any indication, investors should expect the WP8 initiative to take multiple quarters. There are three reasons investors will require a longer time horizon.

First, a solid launch will be positive for Nokia and Microsoft, but a tepid one does not mean the end for WP8. Second, advertising will be costly, and its effectiveness will take time. Samsung’s advertising budget is multiple times greater than that of Apple, and suggests that WP8 advertising spending will need to be high initially. Third, developers will need to support popular apps that are available on Android and iOS systems.

Indirectly, Microsoft’s Windows 8 release for computers will also help market its smartphone. Windows 8 is scheduled to be released on October 26.

Business Section: Investing Ideas

For investors bullish on the prospects of Microsoft’s phone initiative, these are the companies to add to your watch list:

1. Microsoft Corporation (MSFT, Earnings, Analysts, Financials): Develops, licenses, and supports a range of software products and services for various computing devices worldwide. Market cap at $261.48B, most recent closing price at $31.19.

2. Nokia Corporation (NOK, Earnings, Analysts, Financials): Provides Internet and digital mapping and navigation services worldwide. Market cap at $10.62B, most recent closing price at $2.77.

The companies to watch when Windows 8 is released are listed below. If Lenovo’s Windows 8 tablet is $799, expect sales as tepid as Ultra book sales:

3. Intel Corporation (INTC, Earnings, Analysts, Financials): Engages in the design, manufacture, and sale of integrated circuits for computing and communications industries worldwide. Market cap at $115.72B, most recent closing price at $23.13.

4.  Dell Inc. (DELL, Earnings, Analysts, Financials): Provides integrated technology solutions in the information technology (IT) industry worldwide. Market cap at $17.99B, most recent closing price at $10.37. Dell is reducing its reliance on PC sales, moving towards enterprise software and hardware.

5. Hewlett-Packard Company (HPQ, Earnings, Analysts, Financials):  Offers various products, technologies, software, solutions, and services to individual consumers and small- and medium-sized businesses (SMBs), as well as to the government, health, and education sectors worldwide. Market cap at $34.58B, most recent closing price at $17.59. HP is still a company in transition, as it reduces its workforce and focuses on enterprise software. The company will be releasing all-in-one PC’s on Windows 8. A tablet was rumored to be based on the HP Envy line-up.

Written by Chris Lau. To interact and discuss these picks with users, attach your watch list or portfolio to your friends on Kapitall. Message the author. He is ranked sixth (by points) on the all-time leaderboard. The leaderboard is located on your score icon -> Leaderboard.  Members on Kapitall earn free points, and even more points with every Kapitall Generation trade. These points may be redeemed for goods at the Kapitall store.

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