Microsoft: Lumbering Giant No More?

Sep.20.12 | About: Microsoft Corporation (MSFT)

For the better part of a decade and a half, Microsoft (NASDAQ:MSFT) has been a slow moving conglomerate. They have relied on the sales of their Windows operating system as the main source of revenue. Limited product offerings, constant bugs in Windows, and numerous failed product launches later, and Microsoft realized that they were becoming irrelevant quickly. They lost market share to companies like Google (NASDAQ:GOOG), Apple (NASDAQ:AAPL), Samsung, and Amazon (NASDAQ:AMZN). Each one of the competitors beat Microsoft to the major evolution of the user friendly technology space.

Microsoft has been making some major moves over the last 24 months. The partnership formed with struggling Barnes and Noble (NYSE:BKS) on the Nook was a brilliant move. For a small fee, $300 million, they became a major player in Barnes and Noble's tablet. After a struggling smart phone release, the Nook gave Windows a viable mobile consumer friendly product. While the Nook isn't best of breed in the tablet space, it helps introduce Microsoft into a sector with massive growth.

Combine that with the purchase of Skype, and Microsoft has developed an impressive portfolio of products that help them diversify. Just a few days ago, Microsoft also signed a licensing agreement with Research in Motion (RIMM) that allows RIMM to use Microsoft's storage patents in the new Blackberry expected out late this year. This will give Microsoft yet another revenue source coming from the mobile technology sector.

Microsoft currently makes up 11% of the tablet operating system market. With massive growth expected in that area over the next five years, Microsoft could see a significant uptick in their receivables from that area. The key for Microsoft is to start working their way up to the top tier products. Rivals Google and Apple have their own operating systems in smart phones and tablets, and they have a solid stranglehold on market share in each product. Microsoft will need to find an up-and-coming technology to put it's stamp on to boost their company.

The easiest way for Microsoft to do that is if they became the first to truly enter the NFC technology field. With established companies like Walmart (NYSE:WMT), Best Buy (NYSE:BBY), and Target (NYSE:TGT) making moves to accommodate NFC in their stores, the future of commerce has a foundation being built. Companies like Qualcomm (NASDAQ:QCOM), Broadcom (BRCM) and NXP Semiconductor (NASDAQ:NXPI) already produce the hardware required to use NFC technology. If Microsoft could facilitate the marriage between these companies, and become a leader in mobile consumer technology, they could become a leader in the technology space once more. The recent moves with RIM, Skype, and Barnes and Noble show that Microsoft is ready to take back that crown from the likes of Apple and Google.

Disclosure: I am long AAPL, NXPI. 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.

Additional disclosure: Always consult with a financial professional before considering adding a position to your portfolio. Investing involves a certain level of risk. As such, never invest more than you can afford to lose.