The Windows 7 Catalyst

Today, the much-anticipated Windows 7 operating system for PCs hit the market.

In talking with analysts and money managers in recent weeks, I now view the Windows 7 launch as being almost as important as the holiday shopping season this quarter.

The previous operating system from Microsoft , Windows Vista, was released in early 2007 and has more than its share of critics.

In fact, many consumers and businesses have stayed with the prior version, Windows XP, which is eight years old this week.

And that’s exactly why Windows 7 is so important. If the new operating system is well regarded, it could spark an upgrade cycle — especially among businesses. Consumers might upgrade as well, but enterprises are the real key.

I recently talked with Dan Niles, Co-Chief Investment Officer at Alpha One Capital Partners and a respected technology analyst. He told me he’s increasingly focusing on business spending. Consumer-related industries held up better than many people expected earlier in the year, and now he’s watching for signs that businesses are finally at the point where they can spend more.

As you’ll recall, Intel , the world’s biggest chip maker, said last week that it is seeing some improvement in PC demand among consumers, but that enterprise spending remained weak through the third quarter.

Windows 7 will be an important catalyst for the markets this quarter. If it is viewed favorably and its release coincides with a willingness on the part of businesses to loosen their purse strings, investors will cheer. A muted response to Windows 7, however, would almost surely be a negative for the markets.

We’ll watch the story as it unfolds here on the blog and in my Investor Brief e-letter (click here to learn more about Investor Brief), but we probably won’t know until early December what the full Windows 7 impact will be. At the moment, I’m not convinced that it will result in a huge boost in business spending, but it will be interesting to see if it’s enough to keep investors happy and help the markets to a strong finish to 2009.



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