Microsoft: An Overlooked Underdog in Health Care Tech

Many investors only think of Nike, Apple, and Google when they think of next-generation health-care tech. However, Microsoft is an underdog in the market that shouldn’t be ignored.

Feb 27, 2014 at 2:30PM

When most investors think of advances in health care technology, they tend to think of fitness bands from Nike, fitness apps for Apple (NASDAQ:AAPL) iOS and Google (NASDAQ:GOOGL) Android devices, and native iPad EHR (electronic health record) apps from companies like Allscripts.

Yet Microsoft (NASDAQ:MSFT) is rarely mentioned, despite its notable presence in telehealth and EHRs. That's due to the fact that most investors recognize Microsoft for its Windows operating systems, Office software, Xbox consoles, and Windows Phones.

Although those businesses account for the majority of Microsoft's revenue, the company's growing footprint in hospitals shouldn't be ignored. The health care market could represent a new way for Microsoft to boost sales of its Windows operating system across desktops and tablets.

The connection between desktop and tablet EHRs
Microsoft controls more than 90% of the global PC market with five versions of its operating system, from Windows XP through Windows 8.1.

Microsoft's biggest problem is the lackluster adoption of Windows 8 and 8.1, which only have a combined market share of 10.6%, compared to the 47.5% for Windows 7 and 29.3% for Windows XP.

Since Windows is installed on the majority of hospital PCs, older EHR software was usually designed for Windows first. However, there are three major problems with traditional Windows EHR software:

  • No remote access -- doctors have to return to their workstations to input patient data.

  • Generic patient templates that aren't flexible enough to cater to different specialties and practices.

  • Patient templates were designed to save time, but they have also been implicated in causing clerical errors.

To address these complaints, leading EHR providers such as Allscripts, Cerner, and Epic have developed "native" iPad apps that are tethered to the cloud, rather than a desktop workstation.

Screen

Allscripts Wand, one of the most popular native iPad EHR apps. Source: Apple.

iPads can be carried to the patient's bedside, onboard cameras can be used for patient documentation, apps feature simple touch menus, and backing up data over the cloud is more reliable than keeping it in an on-site desktop. In other words, native iPad apps completely cut Windows computers out of the equation.

Now that Microsoft is ending support for Windows XP in April, hospitals must upgrade their systems or risk security breaches. Since iPads are gaining ground in hospitals, hospital administrators could abandon more PCs in favor of iPads.

Offering the same experience on both platforms
Despite these challenges, Microsoft has one key advantage -- cross compatibility.

The same EHR app, for example, can be installed on a PC and tablet running Windows 8/8.1 (not RT). By comparison, an Apple user can't install a Mac program on an iPad or vice versa. When we combine Microsoft's cross-compatibility with the rise of Windows 8/8.1 hybrid devices -- which allow a user to detach the screen as a tablet -- we can see how Microsoft intends to respond to the rise of native iPad EHR apps.

Dell Xps

Dell's XPS 10, an example of a Windows 8 hybrid. Source: Techradar.com.

A physician working at a desk could use a keyboard within the EHR app, then detach the tablet screen while attending to a patient. This idea has appealed to EHR market leaders Allscripts, Epic, and Greenway.

Allscripts is the market leader in EHRs, according to a May 2013 report from SK&A, with an overall market share of 10.6%. Epic trails in third place with a 10.3% share, and Greenway is ranked 11th with a 2% share.

Allscripts and Epic both showcased the integration of their EHR software with Windows 8 at HIMSS (Healthcare Information and Management Systems Society) 2013. Greenway also released its PrimeSUITE mobile EHR app, PrimeMOBILE, for Windows 8. PrimeMOBILE allows physicians to view patient histories, problem lists, progress notes, and appointment schedules.

Microsoft also launched a Windows 8 version of its own cloud-based EHR, HealthVault, which can integrate other health tracking features with third-party EHR apps like PrimeMOBILE.

Greemway

Greenway's PrimeMOBILE. Source: Greenway.

A second chance for the Surface
It's no secret that Microsoft's Surface, which originally launched in October 2012, is still considered a niche device by most consumers.

Last quarter, Microsoft reported that Surface (Surface, Surface RT, Surface 2, Surface Pro) sales more than doubled sequentially from $400 million to $893 million. However, Microsoft didn't report sales by individual units or types, which has led to estimates that the company actually sold less than 2 million Surface units during the quarter. By comparison, Apple sold 26 million iPads in its most recent quarter.

In terms of overall market share, Microsoft finished 2013 with a 3.4% share of the tablet market, compared to Apple's 35%, according to year-end numbers from IDC. Yet rising adoption of Windows 8 tablets/hybrids in hospitals could boost those numbers by the end of 2014.

Ap

Microsoft Surface. Source: Microsoft.

Here are three major reasons that the Surface could eventually displace the iPad in hospitals:

  • Its keyboard cover allows physicians easy access to a keyboard without having to dock to a keyboard (as with hybrid devices) or synchronize via Bluetooth (as with an iPad).

  • It includes a stylus -- a tool that is frequently requested by physicians who want a quick way to jot down notations. More importantly, it blocks input from the wrist while the stylus is being used to eliminate accidental input.

  • The Surface contains more ports (USB 2.0, HDMI, MicroSD) than the iPad, which allows it to be connected to a wider variety of peripherals.

The Foolish takeaway
The global market for EHRs is expected to grow 5.5% annually to $22.3 billion by the end of 2015, according to Accenture. The U.S. market is expected to outpace overseas growth, rising 7.1% annually to $9.3 billion.

Will Microsoft be able to offset weakness in global PC shipments, which fell 10% year over year in 2013, with this slow but steady growth in health care? Investors should keep an eye on these developments in Windows 8 EHRs and Surface sales to find out.

Leo Sun owns shares of Apple. The Motley Fool recommends Accenture and owns shares of Microsoft. It recommends and owns shares of Apple, Google, and Nike. 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 www.fool.com/podcasts.

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 www.fool.com/podcasts, 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