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When Microsoft's Windows Vista operating system hits the shelves next week, don't expect PlayStation-3-style stampedes at your local Best Buy.
The real traffic will be inside your computer. Windows Vista, with its heavy use of graphics and animation, is going to be a stern test for some computers' hardware and memory.
Let's skip the implications for your computer and focus on what that means in terms of opportunity. There's money to be made, if you know where to look.
"Since the early 1990s, the personal computer industry has not seen an operating system that truly taxes the overall hardware and the memory subsystem in a personal computer," says Hans Mosesmann, a chip sector analyst with Nollenberger Capital. "Vista will change this."
This means that as consumers and businesses shift to Vista, they'll buy beefed-up computers that can handle the new demands of the operating system. (Microsoft is the publisher of MSN Money.)
The four most likely winners will be: Micron Technology (MU, news, msgs) and Qimonda (QI, news, msgs), which make processors, graphics card maker Nvidia (NVDA, news, msgs) and the chip maker Intel (INTC, news, msgs). Computer vendors like Hewlett-Packard (HPQ, news, msgs) should also benefit, since a shift toward more powerful machines should stem price declines.
Pretty pictures
One of the chief features that sets Vista apart from past operating systems from Microsoft (MSFT, news, msgs) is a new interface called Windows Aero. It displays a three-dimensional view of programs, allowing users to flip through them easily. As a result, users enjoy "higher-quality graphics analogous to the difference between HDTV and regular TV," says Credit Suisse analyst Robert Semple. The graphics, he says, are similar to what's typically found in "high-end gaming machines."Vista also offers more robust security and several features that make it easier to view and edit digital content like photos, video and music. "Vista forces you to think differently about how you manage your digital media collection," says Mark Mowrey, editor of the TechValue Report and a tech sector analyst with the Al Frank Fund (VALUX). "It's part of this trend of making the computer better at managing digital media in your home."
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While these features don't convince analysts like Mowrey that there will be a "mad rush" to upgrade to Vista (as there was with Windows 95), they offer plenty of advances that will make consumers and businesses make the shift over time. "Vista is a big step forward; in time, you'll want it," writes BusinessWeek's consumer electronics columnist Stephen Wildstrom.
Anyone who bought a computer in the last six months or so will probably have enough processing power to simply upgrade their current operating system to Vista. Other computer users -- and many businesses -- will hold off on the upgrade and make the switch to Vista by purchasing new computers. Either way, you'll need at least two gigabytes (GB) of dynamic random access memory (DRAM) to fully enjoy the new features in Vista, says Wall Street Journal tech columnist Walter Mossberg.
That spells big gains ahead for DRAM makers like Micron Technology and Qimonda. On average, computers sold today have about 800 megabytes of DRAM, says Mosesmann, of Nollenberger Capital. Assuming that the average DRAM content in a personal computer roughly doubles to 1.5 GB, thanks to Vista, and personal computer sales grow by 10% this year, demand for DRAM will grow by 106%. But it looks like DRAM supply will only increase by 60% this year, says Mosesmann. That kind of demand-supply imbalance helps explain why Mosesmann has a buy rating and 12-month price target of $21 on Micron. The stock recently traded for $13. "But any company in the DRAM space will benefit," says Mosesmann.
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