Microsoft Can Compete With Tech Giants in 2014

Microsoft has made changes to drive growth in the New Year. But, will Google and Apple allow it to boost its income?

Jan 9, 2014 at 11:00PM

Microsoft's (NASDAQ:MSFT) investors enjoyed gains of more than 30% in the past year. Despite this, some analysts doubt that the company can get to where it needs to be. However, Microsoft has made changes to drive growth in the New Year. For instance, Microsoft is adding new features to its Windows Phone. Also, the company will soon finalize the purchase of Nokia's devices and services division. Finally, the tech giant has also made some changes to its tablets.

The Nokia purchase
Microsoft is closing in on the purchase of Nokia's devices and services division for $7.2 billion. The deal has been approved by the Department of Justice, the Federal Trade Commission, European Commission, and Nokia shareholders. The deal gives Microsoft a greater business opportunity. Microsoft got less than $10 in revenue from each Nokia Windows phone sold. It stands to make $40 or so in profit margins with the deal. The purchase is also another step toward competing directly with Apple (NASDAQ:AAPL) and Google (NASDAQ:GOOGL) in the mobile hardware and software space.

The prospect of Windows Phone
Microsoft's Windows Phone still lags behind Apple's iOS and Google's Android. However, Microsoft is working on a Windows Phone 8.1 update. The company intends to add a notification center and set volume levels for different apps. The new features should make the devices more appealing to consumers. In December, devices running the Windows 8 and 8.1 crossed over 10% of the market share for the first time.

An area to watch
Microsoft has helped push its smartphone platform by boosting the number of apps in its Windows Phone store. The platform was seeing uploads of approximately 500 new apps per day and has had more than 3 billion downloads to date. Additionally, the store now boasts more than 200,000 apps. Though significantly fewer than the one million apps offered by both Apple and Google, Microsoft is making progress.

Microsoft's tablet exploits
Microsoft made some tweaks to the Surface 2 and Surface Pro 2 last September. Consequently, the company's tablet exploits are also a big area to watch in the New Year. Although the tablets did not break sales records, the tweaks should make them more attractive to consumers. A new survey conducted by Bernstein Research showed that 81% of CIOs plan to purchase Windows tablets, up dramatically from 56% six months ago.

At the end of October, Apple occupied the No. 1 spot for U.S. smartphone subscriber market share for OEMs. While Microsoft is growing in the app sector, its number of apps pales in a comparison to Apple's 950,000 apps. However, it has been reported that iOS 7 will focus more on in-car integration in the future. Apple is improving in that section of iOS to deliver technology to more cars. Apple customers spent over $10 billion in the company's App Store in 2013, demonstrating the continued appeal of native mobile apps.

Google's Android has 52.5% share of the U.S. smartphone operating system market. Google will partner with luxury auto manufacturer Audi to unveil an Android-based vehicle entertainment and information platform. The partnership will allow drivers and their passengers to access services similar to those available on Android-powered smartphones. In 2014, sales of phones and tablets running Google's Android operating system are projected to reach 1 billion users for the first time.

Microsoft CEO, Steve Ballmer, announced in August that he will be stepping down. The decision will provide opportunities for new perspectives in 2014. Nokia's devices and services division will boost Microsoft's growth. New Windows Phone features will enable the product to compete with iOS and Android. The company's tablets will boost sales in the New Year. Microsoft deserves a closer look. Foolish investors should however do their own research before making any investment decisions.

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Mark Girland has no position in any stocks mentioned. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple, Google, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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