Windows 7: An economic savior?

Economic researcher reportedly bases chunk of his GDP expectations for the United States in the second half of 2009, on the new Microsoft operating system.
Written by Larry Dignan, Contributor

Expectations for Windows 7 may be getting a bit out of hand.

It's one thing to expect Windows 7 to juice a PC upgrade cycle, Microsoft's earnings and tech industry growth. It's quite another to think that Windows 7 is going to move the needle on gross domestic product.

In a Bloomberg Radio interview, John Herrmann of economic research outfit Herrmann Forecasting was riffing on how GDP would bounce back in the second half even as consumers were saving--not spending--money. The radio host, Tom Keene, called it Herrmann's conundrum.

Herrmann said a chunk of his GDP expectations for the second half was based on Windows 7. Microsoft will juice capital expenditures and that will propel GDP. Herrmann did not place a figure on Windows 7's impact on GDP.

It may be true that consumers could buy new PCs, and companies that haven't upgraded PCs for five years are waiting for Windows 7. Is an operating system really going to move the U.S. economy? Perhaps it's time for a new mantra: What's good for Microsoft is good for the United States? After all, something has to replace GM in the slogan department.

The real news is that the launch of Windows 7 is clearly reaching its ridiculous expectations stage. Analysts have been arguing that Windows 7 will unleash pent-up hardware demand. For instance, Deutsche Bank analyst Todd Raker wrote in a research note:

This is the first OS that does not require higher end hardware and processors on the PC. This is significant as it will allow legacy Vista PCs to be upgraded to Windows 7. This should add US$500 millio to US$1 billion in incremental revenue if an additional 1 percent to 2 percent of the installed base upgrades to Win 7 without purchasing new PCs. In addition, we believe the traditional hardware refresh cycle will be stronger than typical given the aging base of PCs and pent-up demand from lackluster Vista adoption. We estimate this will add US$400 million in revenue for Microsoft in [financial year] 2010.

The United States has an annual GDP of US$14.29 trillion, according to the CIA Factbook. Windows 7 will, however, have to move a lot more than just a hardware cycle to move the U.S. economy.

This article was first published as a blog post on ZDNet.com.

Editorial standards