1. How to use GuruFocus - Tutorials
  2. What Is in the GuruFocus Premium Membership?
  3. A DIY Guide on How to Invest Using Guru Strategies
Articles (29) 

Here's Why Microsoft Is an Attractive Investment Now

June 13, 2014 | About:

Microsoft (NASDAQ:MSFT) looks solid for the fiscal year 2014. The tech giant’s earnings have increased so far, and the company hopes to build products that people love to use. Microsoft hasn’t shown any weakness, even though investors are seen building their hopes around the stock backed by robust performances of rivals like Google (NASDAQ:GOOG) and Apple (NASDAQ:AAPL). The competition from rivals has made Microsoft position itself to benefit from mobile and cloud markets. And it wasn’t surprising when Microsoft turned in solid results in the recent quarterly report.

A Concern

Microsoft expects its operating expenses to rise 4% for the full year, but the company seems covered, which is why we should be concentrated on its prospects going forward. The company has witnessed tremendous growth in cloud services. Its commercial cloud business more than doubled on a year-on-year basis, with both Azure and Office 365 performing extremely well. Despite the weakness in the PC market, Microsoft had a double-digit growth in Windows Server Premium. It has been growing its share in the U.S. search market. Search revenues increased by 38% in the last quarter.


However, Microsoft faces tough competition from tech giants such as Apple and Google. Microsoft’s rivals continue to make their presence felt in many areas of the tech sector. Apple has acquired at least 23 firms over the last five quarters. For its fiscal year 2013, Apple reported $496 million in net payments made in connection with business acquisitions. Companies that Apple was reported to have purchased during the period include WiFiSlam, Locationary, HopStop and others. These are to boost its future revenues.

Also, the fact that Google has been making some impressive moves to strengthen its wearable business could provide another basis for a rivalry with Microsoft. According to Statistics Portal, wearable technology in the future is estimated to be worth some $12.6 billion. Aware of this opportunity, Microsoft is about to develop a smart watch to gain from it. Google is introducing Android Wear, a version of its mobile operating system designed specifically for wearable devices.

Growth Drivers

One key growth driver that is supplementing Microsoft’s growth in a big way is the business customers segment. Customers continue to make Windows their overwhelming platform of choice. Windows Pro and Windows Licensing revenues grew in the recent quarter. Also, Microsoft’s U.S. search share grew to 18.6%. In addition, Microsoft Office 365 is now on an annual revenue run rate of $2.5 billion, and Azure's revenue grew over 150%.

With the addition of Nokia’s mobile technologies, Microsoft will enhance its device capabilities. Internationally, the company plans to extend the unique entertainment potential of Xbox One, particularly in markets outside of the U.S. Microsoft is strengthening its relationships in China, striking a deal with Chinese security vendor Qihoo 360 in the development of mobile internet and artificial intelligence technologies. Microsoft was recently ranked by International Data Corp. as the first among competitors in Latin America for cloud computing products. Microsoft snatched up European mobile ad firm ScreenTonic with the intention of integrating its capabilities into the tech giant’s adCenter.


All in all, Microsoft looks well-positioned going forward. The stock doesn’t look too expensive at 14 times forward earnings. A dividend yield of 2.70% makes the deal sweater. Throw in the prospects from the Nokia acquisition, an uptick in the cloud market, and the value proposition of Xbox One, and it becomes clear that Microsoft is a winner.

Rating: 3.0/5 (1 vote)



WK1900 - 3 years ago    Report SPAM

MSFT has growth left globally, cash heavy and is positoned to buyout smaller competitors in a variety of areas. MSFT is good for the long term investor.

Please leave your comment:

Performances of the stocks mentioned by tyokunbo

User Generated Screeners

pbarker46E&P CDN
moorebpLeveraged small-caps
kazu2016-12-15 Gori bu
mkettler0217hunting grounds
wqecapitalscreening value growth
wqecapitalscreening 1 value growth
HOLKLSUTrump Trade - Late Stage
Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)

GF Chat