Microsoft Targets Google And Yahoo With New E-Mail Service

| About: Microsoft Corporation (MSFT)
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For many years, Microsoft (NASDAQ:MSFT) attempted to provide e-mail service with its Hotmail brand and e-mail related software service with its Microsoft Outlook brand. In the recent years, the competition which is led by Google's (NASDAQ:GOOG) Gmail and Yahoo's (YHOO) Yahoo Mail took a lot of market share from Hotmail. As Gmail's number of active members reached 425 million, Hotmail failed to pass 400 million members. Finally Microsoft decided to shake things around with a totally new e-mail service

Within hours of launching, captured its first million members. Many people might be just checking it out due to curiosity; however the number is still very large for just a few hours. Microsoft wants to reach the next billion people with this e-mail service and this may take a lot of time even with high demand.

This e-mail service will be cloud-based. What this means is that the users will be able to reach a variety of content such as their contact list and calendar from more than one device. Instead of everything being stored in one computer, things will be stored in Microsoft's servers. Of course Microsoft is not the first company to try this approach but being first may not even matter when all the competition catches up. One of Microsoft's biggest strengths is the company's Office products. Now these products will be mostly web-based and the users will be able to use these using a variety of devices such as a tablet, smart phone and personal computer.

Microsoft realizes that e-mails are becoming less relevant as people conduct their personal communications through social networks and use their e-mail boxes as a place to store newsletters and unrelated content. The best way of making e-mail relevant again would be to integrate it with social networks and clean the junk content out of it. Adding business related useful applications to the mix would be of course the icing on the cake and that's exactly what Microsoft did. is integrated with Facebook (NASDAQ:FB) and soon to be integrated with Skype and Twitter. This is an important step for the company as consumers want to reach as much of their social data as possible with as few clicks as possible. If many aspects of social data are integrated with things like e-mail, this will attract more consumers. Google has been working on integrating its e-mail service with other services too; however Google's social network never became as popular as Facebook, thus leaving a huge gap in Google's idea.

The e-mail service comes with a more aesthetic design and the content of the e-mail will not be used for advertisement purposes. Google's practice of scanning and utilizing the user data in order to maximize its advertisement revenues has attracted a lot of concerns. Many people are concerned that their e-mail content might not be completely private as Google may use e-mail contents to get to know its members better to present them with targeted advertisement based on some complex algorithms. Apparently, Microsoft will not get in that game with

In the investor world, the perception of Microsoft is usually not what one would expect from a technology company. Many people see Microsoft as a fully mature company that's falling behind the curve with very little room for growth. For some reason, a lot of people seem to think that Microsoft has missed the train and it's too late to do anything about it. The fact is different though. Microsoft has been working hard and the company never stopped innovating. For example, last year, Microsoft spent 14% of its revenue on research and development. In comparison, Google spent 12% and Apple (NASDAQ:AAPL) spent 3% of its annual revenue on research and development. While Microsoft's hand is pretty strong in the enterprise market, it is working hard in an attempt to gain back the market share it has lost in the consumer market in the recent years. will be just continuation of the new trend at Microsoft where innovation becomes a bigger part of the game each day.

Microsoft is updating, upgrading and improving almost every service and product it offers. The next 12 months will be a major time for the company as it launches Windows 8 along with many other products. This is a big chance for Microsoft to show its faithful investors that it will continue to be a major player in the technology world. This may be the year Microsoft's investments will pay off. Last week, Microsoft shipped the fully-cooked version of Windows 8 to its partners who will use the operating system in their products such as tablets, smart phones, laptops and desktops. The first Windows 8 products might hit the market as early as next month.

I am excited with the opportunities in front of Microsoft in the short and the medium term. It is impossible to tell how the consumers will receive Windows 8 and the products that go with it, however there is a lot of hype in the media and Microsoft has done a good job of making sure everybody hears about its new products so far. In the technology world, marketing is a big part of being successful with products directed at consumers and I am happy with Microsoft's efforts as of this year.

In the future, Microsoft will continue to be a relatively safe investment with solid dividend and strong fundamentals. If the company accomplishes its goals in the next year or two, the investors of the company will be greatly rewarded. If not, they will still be rewarded decently but the reward may be smaller than great. The company's current dividend yield of 2.64% is comparable to ExxonMobil's (NYSE:XOM) yield of 2.59%. Year to date, Microsoft has appreciated 16%, however it is still off from its peak price of $32.85 by nearly 7%.

Having said that, of course there is no such thing as completely safe investment. There are risks associated with any investment and Microsoft is no exception. The biggest risk in front of Microsoft is the consumer market. Despite all its efforts, the company might fail to gain significant market share in the mobile device and tablet market. This would result in a significant revenue drop in the consumer side of the business and Microsoft would suffer greatly from this. While it would take a lot of damage for Microsoft to swing from profitability to loss, its growth rate can get threatened much easier.

Disclosure: I am long MSFT, GOOG, AAPL, XOM.