Why Microsoft Needs Customers To Catch Its New 'Wave'

Oct.14.13 | About: Microsoft Corporation (MSFT)

Microsoft (NASDAQ:MSFT) is embarking on a bold and brave adventure into the clouds, but there doesn't really seem to be much of a skipper at the helm yet.

Current CEO Steve Ballmer is expected to officially step down this month, joining founder Bill Gates in not running Microsoft.

Except this may not quite be the case.

Though Gates remains busy with his global humanitarian efforts, he remains chairman of the board. Ballmer was also recently elected to a board position. Neither will be involved in day-to-day operations, but both will have a role in the company's greater actions, including being able to vote on the next CEO.

Plus, as ComputerWorld points out, both are active shareholders, Gates with 4.5 percent ownership, and Ballmer with 4 percent.

So what will this passive leadership mean to short-term and long-term investors?

In my view, it will be positive, with a continuation of Ballmer's efforts for the company to continue distancing itself from traditional desktop software and explore new territory. This shift from what has made the company traditionally strong toward unexplored markets does make sense financially, since that's the demand from the public.

In early October, Microsoft unveiled some its future plans with an announcement about a series of products and services to help companies create their own opportunities in the cloud, including a variety of software solutions and the ability to create their own datacenters with storage options.

These new products include Windows Azure, Windows Server 2012 R2, Windows System Center 2012 R2 Visual Studio 2013 and .net 4.5.1, which all can be combined to allow development teams to create better, faster applications.

Microsoft, of course, is excited about the ability to help other companies navigate this landscape, and also hopefully give itself a nice boost. Customers are even being offered discounts on Windows Azure programs.

The enterprise-oriented move to the cloud could mean a potential market of more than $2 trillion, and it makes it even more apparent that smart companies should offer their own public cloud with storage and applications, and make it easy to move within clouds.

This new Enterprise vision - nicknamed "The Wave" because of its immense breadth and depth, does sound exciting to tech watchers and investors.

So far, news of it has helped buoy Microsoft stock in the last week.

It closed Friday at $34.13, up $1.10 from the previous day and approaching its 52-week high of $36 it hit in July.

Microsoft has gained some territory it lost in September, when trading was down to $32 a share, and a really nice climb from January, when trading was in $25 range.

From an investment perspective, Microsoft is a smart buy right now. It has clear goals and though it is coming late to the mobile party with its acquisition of Nokia's (NYSE:NOK) handset division, it is wise to focus on software and service - where it did well in the time of the desktop -- as well as its own alternative to Google (NASDAQ:GOOG) Play or the Apple (NASDAQ:AAPL) Shop.

Microsoft has great ambition for Windows Phone to become the standard go-to place for apps. But right now, developers need a little more convincing before they start creating original content or even alternative versions of titles that are successful for Android/iOS visitors.

Bloomberg reports that there hasn't been the rush to get the Windows Phone app repository bulging with apps. There are currently 175,000 Windows apps, compared with 1 million for Android and about 900,000 for Apple.

Windows Phone is facing a big Catch-22: developers seem to be staying away because there isn't a big audience, and users are staying away because there aren't many products. But Microsoft may be smart in its new focus of offering strong business solutions to enterprise-level customers, rather than a third commercial source for the same games and other apps.

Overall, the Wave does sound encouraging, and companies curious about moving toward cloud-based solutions may find the products and guidance they need to take this plunge. It may eventually lead to a lot of cheering from the sidelines, but right now there's more hopeful curiosity than outright enthusiasm.

Based on the 23.57 growth of Microsoft stock in 2013, even the curiosity goes a long way.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.