It might not be the best of news for the investors and fans of Microsoft (NASDAQ:MSFT) as the giant lost out the battle to Sony (NYSE:SNE) at E3, 2014. This quote from a news author is particularly apt.
“It’s not unusual for one of the console companies to come out ahead at E3 — but this isn’t just Sony winning by a nose; it’s a landslide, and such huge disparities are rare at E3. How did Microsoft get it so wrong?”
Debacle at E3?
However, this E3 was generally better in many ways, and people seemed to be responding pretty well to everything Microsoft unveiled during its press conference, relative to the sentiments last year. This is not to say people didn't have discontent to offer — it's the Internet, and that's just the basic mode of communication around here. Still, there's the feeling that Microsoft upped its game from last year.
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The big problem with Windows 8 devices is that people's opinions are being shaped by what they read online about the operating system. And since much of the reviews and commentary is negative, citing a learning curve and a confusing interface, many are writing off the devices immediately. Microsoft can combat this by allowing people the chance to try the devices on a larger scale, and the Best Buy deal does exactly that.
Sony, already a leader in sales of next-gen consoles, took the cake precisely for this reason. While the PS4 manufacturer unveiled hit after hit for PS4 in the conference, a continuing season of high sales gave the company much-needed confidence. In a post on the US PlayStation blog, Sony announced that it sold 7 million units of the PS4 globally up until April 6. The press release also had the usual slew of statistics: We’re now up to 135 million uses of the Share button, 4.9 million Twitch and Ustream broadcasts, and 90 million spectate sessions. In a previous announcement, Sony said that Infamous Second Son had sold 1 million copies in nine days of availability — pretty good for a new console with a relatively small user base.
At this point in time, Microsoft will need to find out different ways to beef up its console sales even though most of the ways are sealed, including a hoard of games. There is no doubt that Xbox One has not performed at similar levels as did Xbox 360, but the performance could go down further till Microsoft carves out a better strategy for the division.
Windows 8.1 Now!
It is not strange that Windows 8 had to see the roughest of times the last year and the while the latest update 8.1 has fixed many bugs in the earlier OS, the company is far from breaking the surface with its operating system.
The company is, however, taking adequate steps to market Windows 8.1, and one of these efforts is the deal that it entered into with Best Buy (NYSE:BBY) to carve out mini-stores in the retailer’s stores. These mini-stores will give Microsoft a platform to showcase the updated OS and the devices which run it, as well as all of the Microsoft services. Microsoft could demonstrate how SkyDrive, its cloud storage system, allows users to access files from all of its devices. The company could push its Office 365 subscription, showing how documents can be accessed and edited from all devices seamlessly. The possibilities are enormous.
The adoption of the Windows phone in the U.S. has been slow, but the Microsoft mini-stores will give consumers the opportunity to try out the devices. This is good news for Nokia, as more exposure will likely lead to higher sales. The newest Lumia phone, the Lumia 925, has received great reviews touting its exceptional camera and sleek design, and this gives Nokia a real competitor to high-end Android phones. The phone also features a metal shell, differentiating it from cheap-feeling phones made from plastic.
Investors are hoping that a revamp is in Microsoft’s cards with a new CEO on board. Satya Nadella took over as CEO from Steve Ballmer this year and is tasked with a tough road ahead to turn the tech giant back into a growth leader in the space. Sales grew at a 5.6% pace in 2013, below the 7.7% pace over the last decade. Founder Bill Gates (Trades, Portfolio) is spending about a third of his time with the new CEO and told CNBC that the software behemoth is, "re-examining all its strategies," and rethinking how Microsoft can move faster.
While it can certainly be expected that the new CEO could bring about a turnaround as he has come with a hard core sales focus, it is better to hold off investing in the stock till some strong signs of growth are visible.