Microsoft Will Continue To Grow

May. 1.14 | About: Microsoft Corporation (MSFT)


The company has increased its market share in the CRM segment over the last two years.

Microsoft has a considerable cost advantage over its closest rival, and the company uses this advantage to grow its market share.

The continued revenue growth from the segment will help Microsoft to continue its overall revenue growth.

Microsoft (NASDAQ:MSFT) gained over 35% during the last year, and the stock is up almost 8% year-to-date. The performance of the stock has been impressive since the start of the year considering the poor performance of the overall market and other big players. There have always been concerns about Microsoft stock being range-bound and not getting out of this range. However, as I have maintained in my previous articles, I believe the ingredients for growth are present for the company, and the strategy and the direction are right - we will see Microsoft stock make substantial gain over the next few months.

Microsoft is also making major inroads in the CRM industry - the company entered the market in 2003 with its software, Microsoft CRM, with limited services, which was later rebranded to Dynamics CRM with added features. Adapting to the environment, Dynamics CRM is now cloud-based. At the end of the last decade, its share has been drastically taken by fairly newer players like (NYSE:CRM). However, it is fighting to get its share back, and has succeeded to a great level. The CRM industry is growing rapidly. We believe that Microsoft is uniquely positioned to benefit from this growing industry.

Proven Growth and Company's Position in the Market

In the 10-k filing, the head of product line in which CRM falls is "Commercial Others". In the first quarter this year, this particular head of product line has shown exceptional growth rates of 31%, with $453 million of additional revenues. This growth was due to the higher revenues of cloud and Enterprise services.

On April 22, 2013, a survey was conducted among 752 U.S.-based companies in order to find out the market share of popular CRM systems. However, only 490 respondents checked one of the listed CRM systems, and the rest of the respondents checked "others". This gives a considerable part of the market share to unknown or miscellaneous systems. According to the 490 respondents, took the lead with 39.8% of the market share, followed by Microsoft at 20%. Oracle (NASDAQ:ORCL) and SAP AG (NYSE:SAP) were the other two players, with the market share figures of 12.4% and 9.6%, respectively.

In 2011, a survey of revenue growth was conducted, based on which, Microsoft was ranked 7th, occupied the second spot and SAP was the market leader. However, this current survey shows that the shift in the market share has been drastic and Microsoft has shown stellar growth over the last two years. One of the main reasons is the inclusion of the cloud services, as this is the fastest-growing segment in the CRM industry. Increasing market share will further enhance the revenues from this segment.

Microsoft's Advantage

Microsoft's advantage over is pricing - the company offers almost identical features at a lower price. The table below gives a comparison between and Microsoft.

Microsoft Dynamics CRM

Price per user



Cost to add collaboration tools

From $3/user/ month



5-20 GB

1 GB

Cost per GB for additional storage



Click to enlarge

Source: Microsoft

As it is clear from the table above, the difference in the prices is massive. Cost saving is an important factor when it comes to making these type of business decisions, and if a business can get the identical product at a lower cost; it usually opts for the lower-cost option. In addition, cost of collaboration tools is one-fifth of, giving Microsoft a great edge in this area as well. Storage capacity is a crucial element for large organizations especially. Microsoft has an advantage in this area as well due to the massive cloud network and the storage infrastructure of the company, which allows it to offer much more storage at lower cost.

Another benefit of Microsoft Dynamics CRM over's product is that the data can be transferred from cloud to on-premises any time. Having this feature, clients can use on-premises storage for data archiving of old data, which would further save them from storage cost on cloud. may be getting its edge with its customer-focused CRMs, which provide greater value to customers. On the other hand, Microsoft's product is more generalized. However, due to huge price difference, Microsoft has great competitive advantage over, which will allow it to sustain and further grow its market share.

CRM and Office 365

Office 365 is a cloud-based software plus service, which offers various tools of Microsoft Office. These tools include, Exchange, Lync, SharePoint, Office Web Apps. Revenues from this particular service has increased by 104% in the first quarter this year. Microsoft's advantage in this area is that it is now offering Office 365 with Dynamics CRM in a package deal. Client could get both these services at an even lower price and can collaborate between the two platforms easily, as offered in the features.


The growth in the CRM segment remains robust, and especially the mobile segment is expected to grow at much higher rates than the traditional CRM software market. Microsoft has done an excellent job of getting to the second spot in the market share, and if the company continues its push; we might see Microsoft as the market leader in this segment in the not-too-distant future. The company's push in the CRM segment, along with the focus on cloud, mobile and the shift to the new operating systems will allow the company to continue its revenue growth and enhance its fundamentals further. As a result, we believe Microsoft's stock performance will be impressive over the next few months.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Business relationship disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. IAEResearch is not a registered investment advisor or broker/dealer. This article was written by an analyst at IAEResearch and represents his/her personal opinion about the companies mentioned in the article. The article is for informational purposes only and it should not be taken as an investment advice. Investors are encouraged to conduct their own due diligence before making an investment decision. I am not receiving any compensation (other than from Seeking Alpha) for this article, and have no relationship with the companies mentioned in the article.