Wall Street, Analysts, Critics, and others, have never hesitated in calling Microsoft a company that has failed to meet investor expectations. In fact, whenever someone cites a certain company as “the new Microsoft”, it refers to the company as one which has stymied growth, innovation, and excitement for stock holders.
However, is that bound to change now?
Recently, ex-CEO Steve Ballmer, and the Board of Directors, chose Satya Nadella as the successor (CEO) of the billion dollar company founded by Bill Gates and Steve Ballmer. In his short interim, beginning on February 4, 2013, Nadella has made some pretty prominent moves, that have resonated well with Wall Street.
1. Windows OS is now more accessible to developers, and OEM manufacturers
During the Build event, the developers conference of Microsoft, Nadella announced that the company will be making the Windows OS free for devices whose screen sizes will be 9-inches or shorter. In essence, if you are a company wanting to use Windows 8 as the operating system on your handheld device, there is literally no licensing fee involved in using it. This change, is enormous and extremely noteworthy. Before this announcement, Microsoft charged manufacturers $15-$25 to use their OS on their phones, etc. Now that there is no charge, a greater share of original equipment manufacturers will be willing to use Windows OS on their devices. In fact, one of the key reasons as to why Android is so widespread among manufacturers is because Android is an open-source software, and it’s free for manufacturers to use. Given that Microsoft, is now offering the exact same deal, and, in some regards, a better software, low-cost third-party manufacturers in third-world countries will definitely make inlays in utilizing Windows 8 OS for their handheld devices, and in some cases tablets. Ultimately, this will help Microsoft bolster their market share worldwide, which translates into increased earnings, EPS (Earnings Per Share), quarterly performances, consumer and investor confidence, and eventually a higher stock price.
2. Wait, so the iPad now has office?
Remember those advertisements in which Microsoft mocked the iPad for not having the Microsoft Office suite? Here is one if you do not recall one or have not seen one:
Fortunately, or unfortunately, depending on whose side you are on, those days are over. Microsoft recently announced the Microsoft Office suite for the iPad line-up. This change was long-due, and was hailed by analysts, and other as “inevitable”; well they were right. Every iPad user can download the Office application, and use it for viewing documents. However, if the used would like to utilize the software for productive purposes, the user will need to purchase the $99 Office 365 subscription.
The application has been a critical hit, and has already hit 12,000,000 downloads. However, how does this tie into the stock? Well it is quite simple. iPad is the most-popular tablet on the market, and is used by millions. By bringing Office on the iPad, not only is Microsoft adding to their revenues by charging users a fee, but also combating Apple’s iWork suite, and Google’s Google Docs suite, which has increased in adoption. In addition, more users will now be exposed to Microsoft’s Office suite, and future generations will be exposed to the software allow Microsoft to hold its hegemony in this arena. Overall, from a financial point-of-view, this is an extremely wise move.
Looking a year down the line, if Microsoft continues to be innovative in their decisions and offerings, I can easily see Microsoft’s(MSFT) soaring to the mid $40 range to low $50’s. With increased opportunities for greater revenues, and profits, Microsoft will have a tad bit of an easier time beating quarterly expectations, and increasing growth. However, keep in mind, correlation does not imply causation, and there is no guarantee that this is bound to happen.
Regardless, Nadella, in a matter of days, has already made key decisions and proved as a leader that can lead Microsoft in the post-PC era; perhaps even establish it as a prominent player in the emerging portable electronics market.