Microsoft's "One" Strategy Is Starting to Work

Microsoft is evolving into a devices and services company, with the goal of creating a unified experience across all devices, with services powered by the cloud. While Microsoft's push into the mobile market has been slow to succeed, the pieces are all starting to come together.

Jan 29, 2014 at 5:00PM

Last year, Microsoft (NASDAQ:MSFT) reorganized itself around a new strategy. Instead of simply being a software company with a hodgepodge of different businesses, Microsoft shifted to a devices and services model. "One Microsoft," as the strategy is called, is an attempt to unify the company behind a single strategy, increasing collaboration between groups and presenting a consistent experience to customers. While Windows 8 has been drubbed in reviews for being confusing, mixing the classic desktop with the new tile-based start screen, it's part of a strategy that is starting to come together for Microsoft.

A single experience
Switching from using a Windows PC to a mobile device running Android or iOS certainly isn't seamless. This is the problem Windows 8 looks to solve, presenting the same operating system and interface to users of Windows PCs, tablets, and convertible devices. Windows Phone, while distinct from Windows 8, has a similar interface and is based on the same architecture, and Microsoft's acquisition of Nokia's phone operation allows the company to push the platform forward. The recently released Xbox One actually runs multiple operating systems, with a stripped-down version of Windows 8 optimized for non-gaming applications, as well as a different OS built for gaming.

One advantage of having the same underlying Windows architecture powering all of these devices is that developing multi-device applications becomes much easier. The goal for Microsoft is to allow developers to simply "design for Windows" instead of designing for each individual device, and the next update to Windows, code-named "Threshold," aims to unify the different platforms even further.

For consumers, this means having the same experience and apps on every device, be it a PC or a phone. With such a huge Windows install base already intact, this strategy -- executed correctly -- could give Microsoft a big advantage against Android and iOS. There's no guarantee, however, and the next CEO of Microsoft will have to work to make this vision a reality. Microsoft has certainly made plenty of mistakes in the past, from Windows Vista to being years late on the shift to mobile. But its strategy seems more sound today than it's been in a long time.

Microsoft Azure is the glue
The second part of this strategy is services, and Microsoft's Azure cloud-computing platform is the glue that connects these services with Windows devices. Azure has been growing rapidly, with cloud services revenue more than doubling year over year in Microsoft's most recent quarter.

Azure offers the same cloud computing and storage services as Amazon's (NASDAQ:AMZN) Web Services, but Microsoft also utilizes Azure to power its many services. Skype now runs completely on Azure, and SkyDrive, Microsoft's cloud storage service built into Windows 8, is transitioning to exclusively running on Azure. Xbox Live partially runs on Azure, and certain games, like Electronic Arts' upcoming Titanfall, use Azure to run multiplayer.

For developers, Microsoft's Visual Studio Online service allows applications to be tested and deployed to Azure directly from Visual Studio, as well as supporting source control and other features. This is the type of service that makes Azure more appealing than Amazon's web services for those developing applications, and it takes advantage of Microsoft's broad catalog of software and services.

The cloud has become sort of a catch-all term, but there's a real difference between Microsoft's strategy and Amazon's. While Amazon has built up a large cloud business by offering computing and storage at extremely low prices, these services are a commodity. Microsoft offers the same thing, and it matches Amazon's prices, but that's not where the real money is made from the cloud. Using the cloud to deliver high-value services, like Microsoft is doing -- or like IBM is doing with its own cloud -- is what differentiates Microsoft's cloud business from Amazon's.

What this means for investors
Microsoft's vision is compelling, and I'm a big believer in the long-term story at Microsoft. While the technological landscape is fast-changing and unpredictable, it's the most diversified of companies that often stand the test of time. Microsoft is one of those companies.

If Microsoft's recent strong quarter is any indication, the company is managing the decline of the PC market quite well. PC weakness, along with uncertainty over the next CEO, may be what's holding Microsoft's stock back, and investors should take advantage. Microsoft is extremely inexpensive, and backing out the nearly $100 billion in cash and investments from the balance sheet yields an adjusted forward P/E ratio of just 9.

What makes Microsoft a good investment, though, is the potential for growth, driven by Azure and the myriad services that are powered by the cloud. While products like Windows and Office continue to generate huge profits, growth will come from the new businesses that Microsoft is just starting to expand. Not only does Microsoft have serious competitive advantages in its core businesses, the company has also found the business that will drive it into the future. Nine times earnings seems like a pretty good deal.

The bottom line
Microsoft's new "One" strategy is exactly what the company needs, bringing the same interface and experience to all devices and utilizing the cloud to deliver high-value services. The explosion of mobile devices put Microsoft in a position where Windows was no longer powering the majority of computing devices, and this new strategy looks to reverse that trend by giving consumers a real reason to choose Windows over Android and iOS. Execution by the next CEO is critical, but I think that Microsoft has the right idea.

Looking for a big winner in tech?
Opportunities to get wealthy from a single investment don't come around often, but they do exist, and our chief technology officer believes he's found one. In this free report, Jeremy Phillips shares the single company that he believes could transform not only your portfolio, but your entire life. To learn the identity of this stock for free and see why Jeremy is putting more than $100,000 of his own money into it, all you have to do is click here now.

Timothy Green owns shares of Microsoft. The Motley Fool recommends The Motley Fool owns shares of 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.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers