Other hardware makers haven’t had much success either. In fact, Samsung told CNET it planned to avoid making Windows RT tablets for the foreseeable future.
Hope for Microsoft Corporation (NASDAQ:MSFT)
That said, there’s still hope for Microsoft. I wrote back in December that I wouldn’t short the Windows maker then, and I still wouldn’t now.
Despite its failings with Windows, the company has Office, a software suite that Microsoft is turning into more and more of a cloud product every year. In 2010, Microsoft Corporation (NASDAQ:MSFT) rolled out Office Web Apps — a dumbed-down, cloud version of Office. The 2013 version of Office — Office 365 — has become as web-friendly as ever, and has embraced a subscription model.
At some point, it seems inevitable that Office will become a full-fledged cloud program paid for with a subscription. When that day comes, Microsoft should find plenty of eager customers on a variety of operating systems.
Then there’s Xbox. Microsoft looks to be slowly turning its video game console into a dedicated entertainment hub. All eyes seem to be focused on Apple Inc. (NASDAQ:AAPL) for TV’s next step forward — in reality, Microsoft’s Xbox could prove to be the future of smart TV.
Lastly, Microsoft is currently the second-best positioned tech company when it comes to web services. In addition to a cloud-based Office, the company also has SkyDrive, Bing and Outlook. So far, Microsoft has done little with Skype, but the popular messaging and call service could be a potent tool. As cloud computing continues to become dominant, Microsoft’s web services give it an edge for the future.
Put money to work?
But while I wouldn’t short Microsoft, I wouldn’t put money to work either. As it continues to update Windows 8, Microsoft seems committed to keeping the dream alive. Ultimately, the danger is that Microsoft will waste money on Windows in an attempt to keep the operating system relevant. That could mean an underperforming stock.
Rather, if traders want to play to play the decline of Windows, it would be best to do so through Microsoft’s partners Nokia Corporation (ADR) (NYSE:NOK) and Advanced Micro Devices, Inc. (NYSE:AMD).
Nokia Corporation (ADR) (NYSE:NOK) has basically gone all-in on Windows Phone. Nokia has released 12 different Lumia phones at various price points, all of which run on Microsoft’s smartphone operating system. While Microsoft reportedly has plans to release its own phone should Nokia fail, Nokia appears unhedged.
Shares of Nokia are up nearly 27% in the last six months, while short interest is less than 9%. If Android, iOS, and BB10 can cement their hold of the smartphone market, Nokia shares should underperform.
Meanwhile, AMD is perhaps the one company most exposed to the decline of the traditional PC. While rival chip makers like Intel Corporation (NASDAQ:INTC) and Nvidia Corporation (NASDAQ:NVDA) have branched out into mobile chips, the company has largely stayed focus on its traditional bread and butter: CPUs and GPUs for desktop and laptop PCs.
While AMD is working on getting into mobile chips, the company is running out of time. As Leo Sun notes, dwindling cash reserves could force the company into bankruptcy sometime in 2013.
Trading the death of Windows
With the changes going on in the world of computing, Microsoft couldn’t afford to sit by and let Windows slowly become irrelevant. Yet, the gamble it took with Windows 8 seems to have failed.
But because Microsoft is so heavily diversified, the death of Windows doesn’t mean the death of Microsoft. Other companies however, like AMD and Nokia, might not be so lucky.
Joe Kurtz has no position in any stocks mentioned. The Motley Fool owns shares of Microsoft.
