With its expanding portfolio, Microsoft (MSFT) has begun to shed its image as a company that has limited itself to product specialization and has now emerged as a company to be contended with in every area, from social media to cell phones.
What is even more promising than Microsoft's expansion is the fact that consumers have begun to embrace these moves that, with the encouraging revenue figures and the continued development into international markets, has made Microsoft a strong buy for the remainder of 2012.
2011: A Strong Year With Significant Payouts to Investors
2011 was a banner year for Microsoft, as it reported nearly $70 billion in gross revenue, a nearly $8 billion increase from 2011. As a result of these increased earnings, shareholders saw diluted earnings per share rise from $2.10 per share in 2010 to $2.69 in 2011. These positive figures have resulted in Microsoft shares making significant gains from its 52 week low of $24 it endured in June, 2011 to recently cross the $30 per share threshold for the first time since March, 2010.
Windows 8 Is Coming
Accounting for a reported 26% of Microsoft's total value, it is no secret that the release of Windows 8 at the end of 2012 will serve as the most significant software release for Microsoft this year. Projections have been released claiming that Windows 8 sales will surpass Window's 7 sales, which to date has reportedly reached 550 million.
Beyond these profitable projections, Microsoft has also made a significant effort in profiting from continued sales of Windows 7 software. For many years, consumers who were looking to invest in Windows software would wait for several months for the release of the next version. These circumstances were largely attributed to the significant cost that was associated with upgrading to the new software when it became available.
In order to diminish the effect of this consumer mentality, Windows announced that it would offer consumers who have recently purchased Windows 7 an upgrade for the meager price of $15. This significant reduction in price should entice many consumers to make their Windows purchase now.
This move by Microsoft will, in my opinion, not only provide for steady revenue in this normally dull earnings period, but will also increase the already rabid consumer interest for Windows 8, a combination that should see Windows 8 sales exceed Windows 7 sales by substantial numbers.
Xbox 360 is Making Substantial Gains on Nintendo
2011 was a profitable year for the Xbox 360 consul, as it made significant gains on its nearest rival, Nintendo (NTDOY.PK). It was reported that Xbox 360 sales reached nearly 31 million in 2011, approximately 6 million less than Nintendo and approximately 12 million more than Sony's (SNE) Playstation 3.
Beyond the increase in sales itself, users of the system have been subscribing to Microsoft's online gaming community, Xbox Live, which allows video game players to play against other individuals from all over the world. As a result of the increased popularity of this platform, it was reported that Xbox live had 40 million subscribers by the end of 2011.
Windows Phone Outselling iphone in China
For the first two months of 2012, it was reported that Microsoft's Window's Phone outsold Apple's (AAPL) iPhone in China. Although this figure has been discounted due to Apple's inability to currently connect with China Mobile, a company that holds a 70% subscriber base in China, this news, in my opinion, will be substantially more beneficial for Microsoft in the coming months.
China, which recently announced it had topped 1 billion cell phone subscribers, is a country that is booming with opportunity for cell phone companies. While Apple will surely enter the Chinese market more significantly in the months to come, its inability to match Microsoft in its initial stages has given Microsoft a significant head start in capitalizing in this profitable market. Further, Apple has not announced any plans to solve the incompatibility issue in the immediate future, and this inaction will give Microsoft even more of advantage in attracting customers.
Windows Legal Battle With Motorola
On the legal front, it was recently released that Microsoft had prevailed in its infringement lawsuit against Motorola (MMI).
As a result of the order issued by the United States International Trade Commission, Motorola must now modify its technology or pay Microsoft a licensing fee. This legal victory gives Microsoft another significant advantage in the cell phone market, as the highly popular Motorola phones must now either go through costly modifications or be forced to produce Microsoft with an additional source of revenue.
Windows Enters the Social Media Realm
In a discrete release, Microsoft announced that it had released it social networking platform So.cl, a network that targets students. The release of So.cl serves as Microsoft's effort to compete with Google (GOOG) in its Google+ social platform. In its release, Microsoft has made it clear that its intention is not to compete with social media giant Facebook (FB).
Microsoft continues to be on the rise for 2012. With its profitable 2011, large scale success of its many product releases and its ability to further expand its profit potential in global markets, Microsoft's is selling a significant discount, one that will in my opinion result in a 20% growth in share price by the end of 2012.