MSFT, Where are they going?
Posted on: November 15, 2008 - Email Article - Printable Version
Microsoft [MSFT: 29.29, 0.00 (0.00%)] the world’s largest IT company, known for revolutionizing personal computing, has lasted through international conflict, the dot com bubble, anti-trust legislation, and is now continuing onwards through a monumental election and the global financial crisis. The Washington based company has received a lot of criticism in the past few years regarding their latest product offerings, especially Windows Vista. As an IT powerhouse and a market bellwether, investors should be looking forward to see where Microsoft is heading to battle skeptics and the threat of losing market share.
Quick Earnings Recap
Microsoft, operating on one of those awkward fiscal years, reported Q1 2009 earnings in late October, with an EPS of $0.48 with revenue growth of 9% from Q1 2008 as annual sales grew by 20%. Management did mention that many customers are looking to spend less while milking out more from their current computing assets. Expect this trend to continue for the next year as IT spending is flat with end users looking to cut costs by postponing some of their IT related capital expenditures. Enough of the general IT commentary, the important issue at hand is how Microsoft is going to rekindle their growth and assuage any concerns over their plethora of products.
Office for Free?
Microsoft announced late October that their coveted star, Microsoft Office, will be available for free online. This maybe shocking for many who realized that the Business Division, of which Office is apart of contributes roughly 31% to their top line, but this is a strategic move to compete with GoogleApps. This form of computing is known as SaaS, or Software as 
a Service, which often times is powered by a cloud. Refer to my previous article about the investors perspective on cloud computing for more details. This strategic shift could possibly lure more users from rival Google’s [GOOG: 563.18, 0.00 (0.00%)] products and back to the legacy office tools. The SaaS approach has caught on as end users do not have to devote valuable system resources to common processes, but instead access them through a web browser. I think this shift by Ballmer and his team can offer much upside potential, as users can access Office files from any machine linked to the Internet, a true business solution. I would not be surprised to see Office sales increase as more businesses utilize Office Live for its convenience and access anywhere feature.
The Future of Windows
IT headlines have been buzzing about news regarding Microsoft’s next operating system, Windows 7. For investors this is a great sign, however this may be a time to rip a page from the techie handbook and reflect on Microsoft’s past. Although past performance does not dictate the future, Microsoft has been notorious for rushing several operating systems, from WindowsME to Windows Vista. The lack of end user acceptance for Windows Vista has seriously hurt Microsoft, the product is not of high quality that consumers and businesses alike require from the IT powerhouse. Windows 7, the next planned system, will be a make or break product for the company when released in 2010. The next generation OS is supposed to provide greater flexibility and component compliance while not being a resource hog like Vista. Microsoft is said to be working closely with the likes of Intel [INTC: 21.17, 0.00 (0.00%)] and AMD [AMD: 8.92, 0.00 (0.00%)] to ensure that the OS works well with the underlying processing units. Although this will battle compatibility issues faced with Vista, I do not think it is in the best interest of Windows 7’s to be dependent on the underlying hardware architecture that Intel provides with the new Nehalem. I believe any cross compatibility that Windows can offer in regards to hardware and peripheral devices will be beneficial over the long run. I am looking forward to Windows 7 because of its importance to Microsoft’s business due to the fact that Vista was such a bust.
Windows Azure, A Computing Evolution
Microsoft revolutionized computing with the introduction of Windows and furthered their reach with their cutting edge enterprise information solutions. Windows now has the capability to change the computing world once again. Cloud computing, a term I have been raving about, will change technology and more importantly change business in the next decade due to its cost benefits and efficient use of next generation computing systems. Azure has been released to a limited amount of users and will be released for all to license and use next year according to Chief Software Architect Ray Ozzie. The pricing will be competitive, although I am unsure what that means since this is the first cloud platform released for general use. The costs will depend on resource usage and will have various pricing tiers to offer customers the best deals. Ozzie believes that the development of the offering will change computing for the next 50 years. I believe that this will allow Microsoft to rekindle its stagnant growth assuming it is a quality. Paired with the release of Windows 7, I believe Azure can lead to big things for the tech titan.
Microsoft has been around through many monumental events and I believe they will be around for a while longer. Although they need to revitalize their business, this company is a must for anyone interested in investing in IT. The solid dividend and strong management are among many things that make this company attractive. I believe that Microsoft can really experience success if their new products are of high quality and exceed customer expectations. An an IT investor, be sure to stay on top of the stock market news for updates on their new offerings.
The Following Stocks Were Mentioned In This Article: AMD, GOOG, INTC, MSFT
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