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Investing in Microsoft: What to consider
A household name around the world, tech giant Microsoft has been part of the industry for more than 40 years. Despite some loss of traction in the first decade of the 21st century, the company has re-established itself as an industry leader and innovator, with the MSFT stock price doubling in value since 2013. CEO Satya Nadella has proved that he can steer the company in the right direction, upgrading its revenue model with Microsoft Office subscription programs and cloud services, and driving stock price to an all-time high in 2017.
Who should include Microsoft in their portfolios?
- Thematic investors in the tech sector: Microsoft shares have been publically traded since 1986 and are considered by many as the cornerstone of a tech-based portfolio.
- “Buy and hold" investors: Microsoft has shown steady overall gains since 2013, and reached an all-time high in 2017. Long-term investors who believe this positive trend will continue could include MSFT in their portfolio.
- Nadella believers: The current CEO has made some major changes to the company with impressive results. If he continues to do so, the company’s share price could continue to climb.
- Gaming industry enthusiasts: The battle of gaming platforms is ongoing, and PC gamers regard themselves as being above the console players. Unlike console gamers, PC gamers constantly upgrade their hardware, and most of them use Windows as an operating system.
What drives Microsoft’s stock price?
Back in the late 90s, the term ‘Microsoft shares’ was synonymous with the word ‘profit.’ However, the bursting of the dotcom bubble, alongside other events within the company drove the company’s stock price down in the decade that followed. Nevertheless, the company was considered a monopoly for many years, dominating the realm of PC operating systems with little-to-no competition seen. However, the company is no longer operating within a closed space, and is exposed to many external factors.
- Just like other tech companies, Microsoft’s stock is driven by quarterly earnings reports, which serve as an indicator of the company’s success.
- In addition, since the company’s most recent products are subscription-based, user numbers are a major force influencing the MSFT stock.
Despite being more recognizable for its home and office products, Microsoft’s current and future revenue stream rely significantly on its enterprise clients. Amazon is the world’s largest cloud computing service in the world, miles ahead of all other competitors, however in the battle for second place, Microsoft seems to be prevailing against well-known companies such as Google and IBM. For every percentage of market share in this space that Microsoft scoops up, its market cap, and correspondingly, its stock price, could increase.
Microsoft stock: No longer a monopoly
If you own a PC, odds are you are running a Microsoft Windows operating system. For years, the company’s PC OS was pretty much the only one on the market, and as such, enabled the company to hold its place at the highest levels of the tech industry. However, Apple’s growing popularity around the world, with its MacBook product line becoming more widespread, and the emergence of Android and Chrome OS PCs, have reduced some of Microsoft’s dominance in the field.
There are many divisions in the Microsoft corporation, including the aforementioned cloud and Office divisions, alongside XBOX and the futuristic Hololens. Presently, two of the company’s main cash cows are its operating system and Office suite. Microsoft should continue to improve its offering and, while facing new threats and competition, still holds significant chunks in many of the markets in which it operates.
History of Microsoft
Founded in 1975 by Paul Allen and Bill Gates, Microsoft started out as a software company and made its first steps in the Operating System field in 1980. Five years later, the company created the first version of Microsoft Windows, which paved the way to graphical operating systems becoming the norm. Ten years later, the company launched Windows 95, which was its first OS to launch at startup, without needing an underlying operating system.
Microsoft continued to expand and develop new operating systems over the years, becoming the benchmark for user-friendly personal computers. Founder Bill Gates has since stepped down as CEO, replaced at first by Steve Ballmer, who was superseded by Satya Nadella, who has received praise for his ability to modify the company’s business model.
Conclusion: Microsoft will remain a market leader
Since its earliest days, Microsoft has been considered by the general public as an iconic brand and one of the most important tech companies in the world. Despite several failed ventures and price dips, including the 2009 low, which saw its stock crashing to some $15, the company has persevered, becoming more valuable than ever in 2017. With popular brands such as Windows, Minecraft, Office and XBOX, and innovative technologies such as the Hololens, Microsoft has all the tools to maintain its position as a global leader in the tech industry. As its subscriber numbers continue to grow and the need for cloud computing increases, Microsoft could grow even larger than it already is.