Microsoft Stock: Strong-Arm Tactic Will Compel Windows 7 Holdouts To Upgrade

Microsoft Stock

motek 1The article was written by Motek Moyen Research Seeking Alpha’s #1 Writer on Long Ideas and #2 in Technology – Senior Analyst at I Know First.


  • Windows 7 was released almost 10 years ago. Microsoft stock has a headwind from the fact that Windows 7 still touts more than 36% market share.
  • Microsoft failed to meet its target of 1 billion devices on Windows 10 partly because many business and home users refused to upgrade from Windows 7.
  • Windows 7 support will end on January 24, 2020. Only volume licensed Windows 7 Pro and Windows 7 Enterprise versions will get paid extended support.
  • The expensive fees that Microsoft will charge Windows 7 Pro and Windows 7 Enterprise volume license owners will force them to upgrade to Windows 10.
  • I commend this strong-arm tactic of Microsoft. Microsoft is better off when most Windows 7 users are compelled to upgrade to Windows 10.

The latest versions of Windows 10 can now comfortably run old Win32 apps like 2004-era Macromedia Freehand MX. I therefore have no problem with Microsoft’s (MSFT) latest strong-arm approach to force Windows 7 holdouts to upgrade to Windows 10. Windows 7 will no longer have free updates and support from Microsoft on January 24, 2020. Microsoft is also charging high fees for extended support to volume users of Windows 7 only. This paid extended support period will only last until 2023.

This aggressive approach is one more good reason to stay long  Microsoft. Nadella is flexing his muscle in an effort to compel more Windows 7 holdouts to surrender and succumb to the Windows 10 army. MSFT’s YTD price return is only 6.55%. I therefore rate is a buy because it obviously has more upside potential.

(Source: Seeking Alpha)

Home and individual owners of all Windows 7 versions will not get any paid extended support from Microsoft at all. This coercive tactic is necessary because Windows 7 holdouts still accounts for 36.90% of the operating systems used globally. Windows 7 was launched almost 10 years ago and yet it still competes with Windows 10 in terms of usage.

(Source: NetMarketShare)

Business and education licensors/owners of Windows 7 Pro and Windows 7 Enterprise will find it more cost effective to just upgrade to Windows 10. Like I said earlier, Windows 10 is now fully compatible with very old Windows XP and Windows 7-era software. Custom enterprise Win32 apps programmed to run on Windows XP, Windows 2000/NT, and Windows 7 will have no problem installing and running on Windows 10.

The 3-Year Extended Support Costs Are High

Budget-conscious businesses, government agencies, and educational institutions are going to save money by not holding on to Windows 7 anymore. Volume license owners of Windows 7 Enterprise will have to pay $25 per device for the first year, $50 per device on the second year, and $100 on the third year. Worse, Windows 7 Pro’s extended support fees are double that of Windows 7 Enterprise.

Windows 7 Pro volume users will have to pay $50 for the first year, $100 on the second year, and $200 on the third year. This pricing approach is obviously a big stick from Microsoft. It is a bully move that will force more enterprise and other volume Windows 7 users to quickly upgrade to Windows 10.

A Windows 7 Pro upgrade to Windows 10 Pro costs $109 here in the Philippines. I am sure it is cheaper when it is done through OEM or volume licensing. Holding on to Windows 7 Pro and paying for three years of extended support from Microsoft will cost $350.

After January 2023, Windows 7 Enterprise and Windows 7 Pro will become obsolete anyway.

Why Microsoft Needs Everybody To Use Windows 10

Microsoft can save money in maintaining its dominant Windows operating system when all of its customers uses the latest version. This is akin to Apple’s (AAP) own approach to forcing most MacOS and iOS users to upgrade to the latest versions. It costs more money and resources to issue security patches and bug fixes to multiple versions of operating systems.

Issuing patches, plugging vulnerabilities and bug fixes is why Microsoft decided to build and maintain its own built-in Windows 10 anti-virus product, Defender. Maintaining/updating Defender is easier/cheaper done when it’s only for Windows 10 users.

Microsoft implementing more cost-saving measures should help boost its already impressive annual growth in earnings per share. Two years ago, Microsoft’s quarterly EPS was only $1.46. It ended Q4 2018 with $3.23.

(Source: MacroTrends)

The other reason is that Windows 10 is programmed to be more efficient when it comes to personal data collection. Microsoft has a growing advertising business from its Bing search engine. Microsoft wants to gather more intensive data and online habits of people. This is the same logic why it bought professional social network LinkedIn.

Microsoft needs to keep building up a persistent library of the world’s web surfers and online shoppers. Only a Google-like approach to personal data gathering can help Bing Ads attract more advertising customers.

Microsoft’s Android/iOS mobile apps are also delivering targeted ads through Oath’s management. The partnership with Oath was also a cost-savings measure. Microsoft can still gather personal data from mobile devices through Oath-delivered Microsoft advertising.


The persistent pseudo-monopoly of Windows operating system is a strong reason to buy more MSFT. Like how desktop Office is still very relevant, the Windows operating system is still a long-term tailwind for Microsoft. No security-conscious business or home user will ever trust a cloud-based operating system like Chrome. The original offline design of Windows means it is still a more secure operating system.

My buy rating for MSFT is also because of its very solid balance sheet. As of December 31, 2018, Microsoft touts more than $127 billion in cash. This is notably higher than Microsoft’s long-term debt of $75 billion. Microsoft is therefore very liquid and capable of acquiring more companies like LinkedIn. Microsoft can easily afford to buy a 51% controlling stake of Adobe (ADBE) or Autodesk (ADSK).

Lastly, the stock picking AI algorithm of I Know First has a bullish score for MSFT (+100). I Know First’s predictability score for MSFT is 0.6. It means it has a decent record of correctly predicting the one-year forecast of Microsoft’s stock.

Past I Know First Success with MSFT Stock Forecast

I Know First has been bullish on MSFT shares in past forecasts. On September 24, 2017, the I Know First algorithm issued a bullish 1 year forecast for MSFT with a signal of 48.68 and a predictability of 0.53, the algorithm successfully forecasted the movement of the MSFT share.  After a year, MSFT shares rose by 53.55% in line with the I Know First algorithm’s forecast. See chart below.

This bullish forecast for MSFT was sent to I Know First subscribers on September 24, 2017. To subscribe today click here.

I Know First Algorithm Heat-map Explanation

The I Know First algorithm identifies waves in the stock market to forecast its trajectory. Every day the algorithm analyzes raw data to generate an updated forecast for each market. Each forecast includes 2 indicators: signal and predictability.


The signal represents the predicted movement and direction, be it an increase or decrease, for each particular asset; not a percentage or specific target price. The signal strength indicates how much the current price deviates from what the system considers an equilibrium or “fair” price.


The predictability is the historical correlation between the past algorithmic predictions and the actual market movement for each particular asset. The algorithm then averages the results of all the historical predictions, while giving more weight to more recent performances.

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Please note-for trading decisions use the most recent forecast.