ETFs For Cashing in On Windows 7

By Kevin Grewal

Yesterday, Microsoft (MSFT) beat analyst expectations by posting an increase in net income of 60% and an increase in revenues of nearly 14%.

This outperformance was primarily driven by the launch and release of the software giant’s Windows 7 operating system.  The demand for Microsoft’s new operating system has triggered many personal computer users to update and upgrade their systems.

In fact, according to research firm IDC, personal computer shipments around the world increased by 15% in the previous quarter.  Additionally, demand for personal computers especially surged in the United States as shipments jumped nearly 24%. 

This upward trend in demand will likely continue as developed economies around the world continue to recover and developing economies continue to grow.  Business, who implemented lean measures in the past few quarters, will likely seek to upgrade their IT departments, which includes operating systems.  Additionally, the growth of middle classes in developing nations will likely bolster global demand for personal computers as individuals seek to obtain knowledge as well as an improved lifestyle.

Windows 7 has been coined the best operating system in the past decade by various technology experts and is expected to be running on nearly all new computers by 2011.  This should be no surprise, as statistics reveal that nearly 9 in every 10 personal computers around the world operate on Windows.

To further add to Microsoft’s appeal, it appears that the company’s heavy investment in the Internet business is starting to pay off.  Most recently, reports have indicated that Microsoft’s Bing search engine has started to slowly gobble up market share from rivals Google (GOOG) and Yahoo (YHOO) as the company saw its piece of the pie jump close to 11% at the end of 2009.

Improving personal computer sales, exceptional demand for Windows 7 and an increase in the search engine business are all making Microsoft appealing.  For a diversified approach on the Redmond, Washington-based company, take a look at the following ETFs:

  • iShares Dow Jones US Technology (IYW), which allocates 12.2% of its assets to Microsoft.  IYW closed at $53.80 yesterday.
  • Technology Select Sector SPDR (XLK) which allocates 10.3% of its assets to Microsoft.  XLK closed at $21.33 yesterday.
  • Vanguard Information Technology ETF (VGT), which allocates 9.7% of its assets to Microsoft.  VGT closed at $51.54 yesterday.

Although investing in the technology sector comes with its benefits, it also comes with its risks. A good to way to protect against these risks is through the use and implementation if an exit strategy which triggers price points at which an upward trend could potentially be coming to an end.

According to the latest data at www.SmartStops.net, the price points for the aforementioned ETFs are: IYW at $52.65; XLK at $20.96; VGT at $50.42.  These price points fluctuate on a daily basis and reflect changes in market conditions.  Updated data can be found at www.SmartStops.net.

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