Is Microsoft The Ultimate Value Trap?
Amit Chokshi, CFA • 90 Comments
Amit Chokshi, CFA • 90 Comments
Is Microsoft The Ultimate Value Trap?
Amit Chokshi, CFA • 90 Comments
Amit Chokshi, CFA • 90 Comments
Apr. 29, 2015, 10:39 PM
- Following an afternoon Bloomberg report stating Salesforce (NYSE:CRM) has been approached by a potential acquirer, many have speculated archrival Oracle is the suitor. However, BuzzFeed's John Paczkowski (formerly with Re/code) reports Oracle (NYSE:ORCL) hasn't made such a move.
- Outside of Oracle, Microsoft (NASDAQ:MSFT) is the name that has popped up most often. The software giant (closed today with a $399B market cap) is large enough to swallow Salesforce, has relatively limited product overlap - its Dynamics CRM apps compete against Salesforce's apps, but generally with SMBs than enterprises - and has been hungry to grow its cloud exposure. It just set a target of nearly tripling its business cloud service revenue run rate by mid-2018.
- Also: Microsoft and Salesforce struck an Office 365-centered partnership last year. Salesforce CEO Marc Benioff showed up today at Microsoft's BUILD developer conference to trumpet the integration of additional Microsoft and Salesforce apps/services, and made a few tweets about the partnership along the way.
- Salesforce closed up 11.6% today thanks to Bloomberg's report, and then rose 1% in AH trading to $75.41. Many cloud software peers also got a lift.
Apr. 14, 2015, 1:35 PM
- Datazen, declared by Microsoft (MSFT -0.6%) to be "an industry leader" in the mobile business intelligence/data visualization software space, offers Windows, iOS, and Android apps (along with server-side software) for easily viewing/publishing business metrics and creating interactive dashboards that render well on devices large and small.
- Microsoft has bought the startup for an undisclosed sum; the company declares the deal furthers its efforts to offer "easy-to-use, accessible tools to extract maximum value from data – from anywhere, on any device." Datazen's offerings complement Microsoft's cloud-based Power BI business intelligence tools.
- Notably, Microsoft will be bundling Datazen's server software for free with its SQL Server database; Datazen's client apps have already been free to download. The software giant also plans to integrate Datazen's tech with Power BI (available via free and pro versions) to "give our customers another hybrid bridge for their on-premises investment to the cloud."
- The deal strengthens Microsoft's ability to compete against the likes of Tableau (DATA -0.6%) and Qlik (QLIK +1.4%), which both already offer mobile-friendly BI/visualization tools that can be used by non-IT personnel. Tableau, which has been grabbing share from BI incumbents, posted 75% Y/Y sales growth in Q4.
- In January, Microsoft bought Revolution Analytics, a provider of advanced data analysis/modeling tools for statisticians and data scientists. FQ3 results are due on April 23.
Mar. 4, 2015, 1:58 PM
- A day after slumping to new post-IPO lows and coming within $0.03 of $80, Alibaba (NYSE:BABA) has seen dip-buyers emerge in large numbers. Naturally, Yahoo (NASDAQ:YHOO) is along for the ride.
- The gains come as a Chinese publication reports Jack Ma once said he considered acquiring Yahoo, which plans to spin off its Alibaba stake into a publicly-traded company in Q4. Ma's alleged comments: "The acquisition of Yahoo is something I worked [on] a couple of years ago, this is a political problem, not an economic problem, Yahoo is a media [company], more sensitive."
- There has already been speculation Alibaba will try to buy Yahoo's spinoff (much less politically challenging than buying the whole of Yahoo) at some point. Bloomberg's Matt Levine has noted the spinoff will have to wait a year before a deal occurs, in order to maintain its tax-free status.
- Meanwhile, Alibaba's Aliyun cloud services unit (a giant in the Chinese cloud infrastructure market) has opened a Silicon Valley data center, its first in the U.S. For now, the data center will cater to Chinese companies with U.S. operations, but it plans to go after non-Chinese clients later this year. When it does, Amazon (NASDAQ:AMZN), Google (NASDAQ:GOOG), Microsoft (NASDAQ:MSFT), and a slew of other incumbents will be waiting.
Feb. 12, 2015, 1:11 PM
- Israel's Globes and Calcalist report Microsoft (MSFT +1%) is acquiring N-trig, a local developer of digital styluses and stylus/touch controller chips. Both suggest the deal price is around $200M.
- With N-trig's technology powering Surface tablet styluses, Microsoft already accounts for 79% of the company's revenue. N-trig has raised $130M via 8 funding rounds, but had less than $5M in cash left as of June 2014. Plans for a Tel Aviv IPO were cancelled last year.
- A common sight on pre-iPhone smartphones, styluses are now most notably used with Surface tablets and (courtesy of Samsung's proprietary S-Pen) Samsung's Galaxy Note line. However, there are also plenty of 3rd-party stylus accessories available for the iPad and Android tablets, and rumors that Apple will offer a stylus for an upcoming 12.9" iPad aimed at business users and creative professionals.
- Separately, Microsoft has confirmed its acquisition of calendar app maker Sunrise; TechCrunch reported last week the deal features a $100M+ price.
- Other recent acquisitions: Revolution Analytics, Equivio, HockeyApp
Feb. 4, 2015, 2:53 PM
- TechCrunch reports Microsoft (MSFT +0.9%) has acquired Sunrise, a developer of mobile (iOS/Android) and cloud-based calendar apps, for a price of "at least $100 million."
- Sunrise's apps respectively have ratings of 4.5/5 and 4.3/5 stars on the App Store and Google Play; Google Play reports seeing 500K-1M installs. The apps sync/integrate with Microsoft Exchange, Google Calendar, Eventbrite, and iCloud. TechCrunch reports hearing the apps will remain available on a standalone basis.
- The report comes two months after Microsoft, which has done much to boost its cross-platform credentials in the Satya Nadella era, bought iOS/Android e-mail app developer Acompli for a reported $200M+. Acompli's app underpins new Outlook mobile apps launched by the software giant.
- Two weeks ago: Microsoft shows off HoloLens, new browser, universal apps
Jan. 23, 2015, 1:45 PM
- Revolution Analytics provides software (both free and enterprise versions) for using the open-source R statistical data analysis/modeling programming language. The company notes R is used by millions of statisticians and data scientists, and has "become the most popular language for data science and an essential tool for Finance and analytics-driven companies such as Google, Facebook, and LinkedIn."
- Microsoft (MSFT +0.2%) says it's acquiring Revolution to "help more companies use the power of R and data science to unlock big data insights with advanced analytics." Terms are undisclosed.
- The software giant observes Revolution's software enables the use of R-based analytics across giant datasets (including ones leveraging the popular Hadoop big data framework), and that its customers include major banks, pharma companies, manufacturing firms, and tech companies. It adds Revolution's offerings will be supported via Azure's public cloud services, as well as hybrid clouds and traditional on-premise deployments.
- The deal comes on the heels of Microsoft's purchase of legal/compliance text analysis software firm Equivio, whose technology will be integrated with Office. Microsoft has also launched an Azure predictive analytics service and an analytics hardware appliance (sold by OEM partners) since Satya Nadella became CEO.
Dec. 11, 2014, 6:24 PM
- Microsoft (NASDAQ:MSFT) has bought HockeyApp, a provider of services that analyze crash data and distribute beta releases of apps for iOS and Android developers. Terms are undisclosed.
- Microsoft, hungry to win over mobile and Web/cloud developers who haven't historically embraced its products, plans to include HockeyApp's features in a new version of it Application Insights analytics service, which integrates with the company's mainstay Visual Studio app development suite.
- Last month, Microsoft announced it would make Visual Studio free for non-enterprise users, and promised Visual Studio 2015 would be "built from the ground up with support for iOS, Android and Windows." Facebook, Twitter, and Google have also released a bevy of tools for mobile developers.
- Separately, Microsoft has made its MSN consumer apps (formerly known as Bing apps) available on the iOS App Store, Google Play, and Amazon's Appstore for Android. News, sports, weather, finance, and health/fitness apps are among the released products; they were already available on Windows (through the Metro UI) and Windows Phone.
Dec. 4, 2014, 9:49 AM
- Along with its FQ2 results, Barnes & Noble (BKS -11.4%) has announced it's buying Microsoft's (MSFT +1.6%) stake in Nook Media for $62.4M in cash and 2.7M shares (current value of $52.8M). The companies have also "agreed to terminate their commercial agreement." (8-K)
- With Microsoft having invested $300M in Nook Media (contains B&N's Nook hardware, online bookstore, e-book, and college bookstore ops) in 2012 for a 17.6% stake, the software giant is taking a ~$185M loss on its investment.
- B&N's Nook segment revenue (covers hardware, digital content, and accessories) fell 41.3% Y/Y in FQ2 to just $62M, thanks to tough competition from Amazon and ongoing tablet cannibalization of e-readers. B&N's college segment saw revenue rise 1.9% to $751M.
- The sale follows Microsoft's July decision to lay off roughly half the workers in its Nokia phone unit, as part of a broader restructuring.
Dec. 1, 2014, 11:18 AM
- Acompli provides popular Android/iOS e-mail apps that support a variety of e-mail (Microsoft Exchange, Gmail, Outlook.com) and cloud productivity (Office 365, iCloud, Google Apps) platforms. Re/code reports hearing Microsoft (MSFT +1.1%) is paying $200M+ to buy the startup.
- "Acompli is the powerhouse email app for iPhone that Outlook users have been waiting for," The Verge declared in an April review. The app's integrated calendar and ability to provide quick access to recently-viewed files/attachments and important contacts received high marks. "Taken together, Acompli’s design encourages you to start thinking of your iPhone as a workstation in its own right."
- Microsoft: "In a world where more than half of email messages are first read on a mobile device, it’s essential to give people fantastic email experiences wherever they go ... We’re excited about what’s possible as we build on [Acompli's] success and bring it together with work currently in progress by the Outlook team."
- A recent unfinished blog post from a Microsoft VP suggested a deal would soon be announced. The purchase adds to a multi-platform push that has seen the release of free iPad Office apps and an Office/Dropbox integration deal.
Nov. 13, 2014, 8:37 AM
- The WSJ reports Microsoft (NASDAQ:MSFT) has reached a deal to buy Israeli cybersecurity/identity-protection software firm Aorato for ~$200M, and plans to announce it today. The paper reported in July a deal was close.
- Aorato's products complement Microsoft's Active Directory enterprise authentication/ID-management software service, since they analyze Active Directory interactions to create user profiles and detect suspicious activity. There could also be synergies with the cloud-based Azure Active Directory service.
- In its latest effort to grow its developer base (previous) and support rival platforms, Microsoft is open-sourcing the server stack for its.NET software framework (underpins many Windows apps), and allowing developers to write server/cloud-based .NET apps for Linux and Mac OS. The move could help .NET better compete against alternatives such as Ruby on Rails and PHP.
- Microsoft has also: 1) Launched a free version of its mainstay Visual Studio 2013 app development suite for non-enterprise users. 2) Previewed Visual Studio 2015, which the company says is "built from the ground up with support for iOS, Android and Windows."
- Microsoft says it will "shortly" reach 10M Xbox One sales, and that sales have tripled since a $50 price cut went into effect on Nov. 2. The latest figures still leaves the One's total sales behind the 13.5M seen by the PS4 as of the end of Q3.
- The pickup in Xbox One sales is a positive for CPU/GPU supplier AMD, which was estimated by IHS last year to receive $110 per unit.
- Update: Microsoft has confirmed the Aorato acquisition. "We are making this acquisition to give customers a new level of protection against threats through better visibility into their identity infrastructure."
Oct. 7, 2014, 5:38 PM
- Bloomberg and the WSJ report Microsoft (NASDAQ:MSFT) has signed a letter of intent to buy Equivio, an Israeli developer of text-analysis software used for corporate/legal e-discovery and information governance applications. The WSJ reports the price is around $200M.
- Equivio's software relies on machine learning algorithms to analyze and group together documents. Potential use cases include grouping near-duplicates, reconstructing e-mail threads, and data mining. Clients include the DOJ, the FTC, KPMG, Deloitte, and many law firms.
- Like Google and Facebook, Microsoft has already shown a keen interest in machine learning; an Azure machine learning service that provides predictive analytics is currently in beta. In addition to enterprise apps/services, the technology is leveraged by consumer-facing Microsoft products such as Bing, Cortana, and the Xbox/Kinect.
Sep. 15, 2014, 9:39 AM
- Microsoft (MSFT -0.2%) has reached an agreement to buy Mojang, and the company’s iconic Minecraft franchise for $2.5B.
- The acquisition marks the largest purchase ever for chief executive Satya Nadella, who says the purchase "is more than a great game franchise - it is an open world platform, driven by a vibrant community...with new opportunities for that community and for Microsoft."
- Microsoft expects the acquisition to be break-even in FY15 on a GAAP basis. The acquisition is expected to close in late 2014.
Sep. 10, 2014, 7:47 AM
- The $2B price tag that Microsoft (NASDAQ:MSFT) is reportedly willing to swallow for Minecraft maker Mojang is on par with other large video games deals, although not all have panned out.
- Analyst take: Cowen calls Minecraft one of the great gaming success stories of the last ten years, while some tech analysts warn the franchise has lost some momentum and could be hard to recharge.
- Sources have indicated that Microsoft will use overseas cash to pay for the acquisition to lighten its tax obligation.
- MSFT +0.5% premarket
Sep. 9, 2014, 6:26 PM
- Microsoft (NASDAQ:MSFT) is in "serious discussions" to buy Mojang AB -- the maker of popular world-building game Minecraft -- in a deal valued at more than $2B, a source tells The Wall Street Journal.
- A deal could come as early as this week, and would be the first truly major acquisition for CEO Satya Nadella since he took the job in February.
- Mojang has sold more than 50M copies of the game since its 2009 release but has shunned big corporations -- and, particularly, Microsoft specifically.
- MSFT +0.2% after hours.
Jul. 11, 2014, 6:28 PM
- "We viewed [Satya Nadella's] letter yesterday to employees as putting everyone on notice that he wants to make organizational changes," writes Nomura's Rick Sherlund after taking in Nadella's missive.
- Sherlund thinks Microsoft (MSFT +1%) might shed 5%-10% of the ~125K employees working for either Microsoft proper or Nokia's phone unit. He estimates cutting a quarter of the 25K-strong Nokia workforce would "eliminate about $1.0b of cost structure."
- Meanwhile, others have honed in on Nadella's productivity emphasis, and his attempts to distance himself from Steve Ballmer's "devices & services" mantra. Harry McCracken: "The new vision ... feels less like it’s reacting to the changes to the industry which Apple has wrought by imitating them: Apple is never, ever going to have a mission statement which leads with the word 'productivity.'"
- CITEworld, for its part, likes Nadella's remarks about making heavy use of data to drive product decision-making.
- In an interview with The Verge, Nadella rejects traditional distinctions between enterprise and consumer markets. "Any thinking consumer should consider Microsoft because guess what, you're not just a consumer. You're also going to go to work, you're also going to be productive and we can do a better job for you in there"
- Microsoft has acquired InMage, a provider of disaster recovery/failover hardware and software for businesses and service providers. The company plans to integrate InMage's technology, which captures data changes in real-time, with Azure's recently-launched Site Recovery service.
Apr. 21, 2014, 10:40 AM
- Microsoft's (MSFT -0.5%) acquisition of Nokia's (NOK -0.1%) Devices & Services unit will close on April 25.
- Three changes have been made to the original deal: 1) Microsoft won't acquire Nokia's Korean manufacturing facility. 2) Microsoft will "manage" Nokia.com and Nokia social media sites for up to a year. 3) 21 Chinese employees of Nokia's Chief Technology Office will join Microsoft.
- Chinese government approval (provided two weeks ago) ended the last major regulatory hurdle for the deal, which was originally set to close in March. Nokia stands to reap a $7.5B cash windfall that it might direct towards a mixture of acquisitions - the company has said it's focusing on smaller deals - and capital returns.
- Microsoft, meanwhile, will have to get to work on turning around a business that posted a 29% Y/Y sales drop and a -7.3% non-IFRS op. margin in Q4, in large part due to plunging feature phone sales.
Microsoft Corp. develops and markets software, services and hardware that deliver new opportunities, greater convenience and enhanced value to people's lives. The company's products include operating systems for computing devices, servers, phones, and other intelligent devices; server... More
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