2014 Will Be a Huge Year for Microsoft

With 2013 rapidly coming to a close, investors are starting to look ahead to next year, assessing stocks in their portfolios. Of all the components in the Dow Jones Industrial Average (DJINDICES: ^DJI  ) , Microsoft (NASDAQ: MSFT  ) stands out. Next year will be critical for Microsoft, as the Windows-maker moves forward in its ongoing transformation.

Over the last decade, Microsoft has lagged its primary competitors Apple (NASDAQ: AAPL  ) and Google (NASDAQ: GOOGL  ) in shareholder-value creation, as the company's growth has remained sluggish.

MSFT Chart

MSFT data by YCharts

A new chief executive
The biggest change will come in the form of a new CEO. Steve Ballmer's successor could be named sometime this month and will have a big hand in shaping the company's future.

Microsoft has narrowed its list of candidates down to two, according to Bloomberg. The company will pick either current Ford CEO Alan Mulally or Microsoft's VP of its cloud-and-enterprise group, Satya Nadella.

Mulally is a friend of Steve Ballmer and helped Microsoft's current CEO reorganize the company earlier this year, making it likely that he would stay the course. Although he isn't a tech expert, Mulally is well-regarded for successful stints at Ford and Boeing. Still, at 68, he would probably be a stopgap solution.

Picking Nadella would probably signal a greater focus on cloud-based services and solutions. Microsoft has been moving in that direction already with Office 365 and Windows Azure; with Nadella at the helm, the emphasis on the cloud should be expected to continue.

What will become of Bing and Xbox?
Ahead of Microsoft naming its next CEO, speculation has surfaced that the company could spin off, sell, or otherwise shut down its Xbox and search-engine businesses. If the Bloomberg report is accurate, Stephen Elop has been eliminated from contention, but had he been named Microsoft's next CEO he was said to be considering such a move.

Arguably, both businesses are secondary to Microsoft's primary products and getting rid of them could allow Microsoft to transform itself into a more tightly focused company. Moreover, both have cost Microsoft money in recent years -- Bing in particular has bled Microsoft of billions.

At the same time, Bing and Xbox stand as two of Microsoft's most competitive products. Apple recently confirmed that it had acquired PrimeSense, the company that designed the chips for use in Microsoft's Xbox add-on Kinect. With PrimeSense in tow, Apple seems to be preparing for its assault on the living room -- a market that Microsoft is already serving with its new Xbox One.

Microsoft's Bing is more or less the only product stopping Google from having a total monopoly on search. Although Bing remains firmly in second place, Microsoft has stepped up its anti-Google efforts with a more aggressive "Scroogled" campaign and has integrated Bing heavily into the new Windows 8.1 update.

Devices and services
Over the last decade, Microsoft has been a consistent dividend payer, but its growth has sharply lagged rivals Apple and Google. Microsoft's next CEO will get the opportunity to shift the company's focus going forward, perhaps slimming the company down by getting rid of divisions or emphasizing new businesses and cloud services.

At any rate, 2014 is set to be a huge year for Microsoft.

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Read/Post Comments (6) | Recommend This Article (9)

Comments from our Foolish Readers

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  • Report this Comment On December 02, 2013, at 1:22 PM, st0815 wrote:

    Your argument that "2014 is set to be a huge year for Microsoft" seems to boil down to: "At any rate". The rest is speculation on who will be the next CEO and what he may or may not do.

    The company is in trouble, its stock hasn't moved in almost 10 years, and the only candidates for CEO apparently are people who lack any understanding of MS' core business. They are going nowhere in mobile and their ability to leverage their desktop dominance into other markets is rapidly diminishing.

    The only upside for them is that at least Elop is no longer considered after his disastrous run at Nokia, and of course that they finally get rid of Balmer,

    so that indicates that their board has some sanity left.

  • Report this Comment On December 02, 2013, at 1:23 PM, djtetsu wrote:

    Everytime the word "Windows 8" or even "Microsoft" come up in conversations I see bitter facial expressions.

    You didn't mention any solid reasons why it's going to be so big? Beside getting a new CEO.. at which point I can imagine a potential spike.

    I will be watching in the sidelines.

  • Report this Comment On December 02, 2013, at 2:07 PM, FoolishLonghorn wrote:

    When the articles states that "2014 Will Be a Huge Year for Microsoft", that is not meant to be translated as "Microsoft stock will make huge gains in 2014".

    Rather, 2014 will be a pivotal year for Microsoft as the leadership changes, with possible exits of some markets, and entries into others.

    Huge is a poor word choice, but I think the intent is clear after reading the article.

  • Report this Comment On December 02, 2013, at 3:02 PM, symbolset wrote:

    @FoolishLongorn Agreed.

  • Report this Comment On December 04, 2013, at 12:28 PM, MadDogDav wrote:

    The investment thesis may or may not improve with the change in leadership. Either way, there are much better investment opportunities until MicroSoft can prove itself a growth investment again.

  • Report this Comment On December 06, 2013, at 3:51 PM, cmalek wrote:

    Another reason that it might be a "huge" year for MSFT is that on April 1, 2014 (a very apropriate date) Long Term Support for Windows XP ends. A significant number of corporate users are still using XP. They have legacy software that will not run on any other O/S but XP. A few years ago they and others have dug in their heels and forced MSFT to extend Long Term Support until 04/2014. IF MSFT can now force all these users to upgrade to the current version of Windows (or at least Win7), it would mean a LARGE financial windfall for MSFT.

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