Microsoft (MSFT) is a leading developer of software and hardware in the computing industry. It is the largest software company in the world ahead of Oracle (ORCL), SAP (SAP) and Symantec (SYMC). Its operating system, Microsoft Windows, for personal computers is used by both HP (HPQ), Dell (DELL) and IBM (IBM), along with other less notable PC developers, and even Apple (AAPL) supports its operating system via parallel desktops.
Microsoft has developed the Windows 8 Operating System which is due for release in October. Windows 8 includes touch screen technology which is intended to enhance the user's experience following in the footsteps of mobile phones and tablets. Windows 8 includes the new 'Metro environment' where applications share information, are tile-based, and show relevant information. Microsoft has also provided the option to download apps from the Windows Store, and two apps can be run side-by-side using snap.
Windows 8 is a massive overhaul from the Windows 7 operating system. It is far better integrated than its predecessor, achieving integration between personal computers, tablets, phones and a variety of other items which run on Windows. This integration seems similar to the way Apple's popular products work and shows Microsoft's willingness to compete with Apple on a larger scale. The new operating system is likely to be a huge success and with it Microsoft should start to take some of the market share it has lost in recent years back.
Microsoft is currently investing heavily to take advantage of the rapidly growing online marketplace as companies like Facebook (FB) have shown how useful the Internet can be. It spent in excess of $700 million in capital expenditures last quarter. It is also spending more on research and development, and advertising, both productive steps to ensure long term growth.
Microsoft is continuing to try to gain a foothold in the mobile and tablet markets. It has met with little success so far. However, provided Windows 8 launches successfully in October, it should find it easier to expand in these markets as Windows will allow full integration between the phones and the personal computers running Windows 8. This will make it a vastly more attractive option for the average consumer.
Microsoft is spending heavily on capital expenditures which means that its earnings and net profit will be impacted over the next year. Its overall expenses are also likely to increase over the short term as it focuses on improving its software and expanding.
Furthermore, Microsoft has powerful competition in every sector it operates in. Microsoft Bing has struggled to steal market share from Google's (GOOG) search engine. Its Xbox gaming console has also faced stiff competition from the Playstation system developed by Sony (SNE). It is exposed because it is such a diverse company. Microsoft faces risks in many of the different sectors it operates in and perhaps it is too diversified for its own good.
Microsoft has traditionally done extremely well off releases of completely revamped operating systems. Much of its core management have a wealth of experience in developing hugely successful products. It also has a very high quick ratio which means it can easily pay off its debt with its cash which means it is a financially stable company. Microsoft's current market share is very low right now so this is not likely to decrease much more as a large amount of demand for computers operating Windows comes from corporations that prefer Microsoft Windows to Apple's operating system just like they prefer Research In Motion's (RIMM) Blackberry to the iPhone. Therefore, Microsoft at the current price is a very good buy for returns in the near future as it should rise significantly over the coming months off expectations for a successful October launch.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in MSFT over the next 72 hours.