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Summary

  • This article is a take on several trends affecting Microsoft both positively and negatively.
  • It's hard to draw clear conclusions at this point, but many of the trends are very powerful.
  • Thus, all of these trends bear monitoring.

This article vows to illustrate some of the positives and negatives which are out there today and might impact Microsoft's (NASDAQ:MSFT) business in the future.

Positive - Office pricing

Office 365 goes for $99 per seat per year. This is a major increase in pricing from former Office packages which were more expensive than that, but you only bought them once. If Microsoft is able to convert the market fully to this approach it will gain an increased source of revenues and profits.

On the other hand, having to pay for Office over and over might lead some smaller companies to question the need. Either using Google Apps, or a myriad of alternatives related to Open Office, most small companies could entirely sidestep Microsoft. I believe this is going to be a growing problem. Even personally, on my computers which don't have Office, I've started installing Open Office. For run-of-the-mill tasks, Open Office is more than enough, be it for spreadsheets or written documents.

Positive - Intel's Broadwell Y/Core M

Intel (NASDAQ:INTC) is coming out with a new line of SoCs for mobile devices which will retail under the Core M brand. This line brings Core I power to mobile devices and should be highly desirable for those seeking to stay within the Windows ecosystem. This is particularly relevant because this SoC will be able to run in fanless applications.

I myself had sworn away from laptops with fans after having two of them breaking down due to cooling issues. I expect not to be alone in this regard, and there might be a measure of pent-up demand for Microsoft products running on fanless devices. This product hitting the market will thus enable a further upgrade bump both for Intel and Microsoft.

Negative - the mobile market

The smartphone market is lost for Microsoft. Windows Phone is not going to get the traction. After Microsoft cuts off half of the incoming Nokia workforce, it's hard for there not to be some kind of morale impact which will make it even harder for Microsoft to compete effectively.

The tablet market also is mostly lost to Microsoft as there's no resistance to buying an iOS or Android tablet over one powered by Microsoft Windows.

Negative - Chromebooks

Chromebooks are showing that it's possible to have laptops today which don't require Microsoft or Microsoft-compatible products. As they start being adopted by consumers, each sale here represents a lost sale for Microsoft.

This is even more worrisome when as content consumption gets more web-centric and app-centric, it leads to Chromebooks appearing as more of a viable alternative.

Negative - Cloud computing

Even though Microsoft is a force to be reckoned with in cloud computing, I see cloud computing as a negative for Microsoft.

First, winning is not necessarily winning. Cloud computing is likely to be much lower margin than what Microsoft is used to.

Second, people don't care whose software the cloud is running, and the resulting interaction with users tends to be through standards-based interfaces (such as browsers). This removes the need for the software to be Microsoft's both at the server end and at the client's end. Microsoft is having some success at the server end anyway, but it bears recognizing the problem.

Conclusion

It would seem that the positives are more near term and the negatives, more longer term. Still, it's important to know how these factors can influence Microsoft's future prospects.

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