Is Microsoft’s cloud strategy a reason to include them in your wealth management plan?
Microsoft has been through some turbulent times in the last decade, having fallen from the number one position as the most valuable technology company in the world. The lack of innovation within the organisation has led to its competitors taking the reins in the tech and digital world and leaving Microsoft to dominate the declining personal computing space.
In 1995 Microsoft launched Windows 95 and Office and had since then continued to dominate personal computer software sales worldwide. In recent years, the shift to mobile devices has been profound. Some have criticised Microsoft for missing an important technological shift with the shrinking of devices and the rise of Android and iOS platforms.
These factors have contributed to a loss of confidence in one of the most iconic brands in the technology space, and when founder, Bill Gates retired and left the company in the hands of Steve Ballmer, confidence faltered even more. According to many analysts, Ballmer was responsible for much of the downfall of Microsoft, having made many questionable acquisitions to make up for the lack of innovation and a cohesive strategy in the organisation.
In the last few years, Microsoft has slowly started clawing its way back.
Satya Nadella, appointed as CEO in February 2014, has already made a remarkable difference in the organisation by instilling confidence in its shareholders. After making hard decisions that cost thousands of people their jobs, Nadella is focused on rebuilding the business.
With the launch of cloud services, Windows 10, Surface 3, key acquisitions and investments, Microsoft is forcing its competitors to take notice. In January 2016, investors seemed impressed with Microsoft’s progress in the cloud business. They reported financial results for the second fiscal quarter that outperformed Wall Street predications. Revenue for the quarter was $25.7 billion and earnings per share was 78 cents.
Currently investors are highly focused on how well Microsoft is progressing in the cloud business with its Azure cloud and Office 365 products. The shift from once-off software sales to annual subscriptions is a vital transition that Microsoft must make to remain relevant in a new cloud first, mobile first world. Revenue from the cloud business has grown significantly from last year and research indicates that one third of Fortune 500 companies now use the company’s Enterprise Mobility services. Its Office 365 revenue grew nearly 70% with the subscriber count now at 20.6 million.
Microsoft is an organisation in transition, moving from software sales for stand alone PC’s and servers to annual subscription fees for mobile and cloud services. This organisation is set to be around for many years to come and is predicted to grow its revenue and increase its brand value. This kind of turnaround, along with an increasing dividend, is indeed making Microsoft a consideration as an investment in your portfolio. For more advice on how to invest in the best global brands contact us here.