Why Microsoft Corporation Will Continue to Be Successful

Microsoft is now considered an outperformer. Will Amazon and Sony allow it to continue enjoying this status?

May 5, 2014 at 2:00PM

Just a year ago, Microsoft (NASDAQ:MSFT) was considered by some analysts to be one of the Dow's laggards. Things have changed, however, and it has assumed a new status as an outperformer. The company's sustained growth shows that it is still a power in the tech sector. Its Microsoft Azure Intelligent System Service, the steady growth of Xbox sales, and the improving fortunes of Office 365 will ensure that the company continues to be the stock market's darling into the future.

A new kind of warehouse
Microsoft has come to the conclusion that its embedded software can't hide from the World Wide Web anymore. Consequently, the company has developed a new product called Microsoft Azure Intelligent Systems Service. It is like a warehouse for sorting the data flowing into your system. Since it has the capacity for analysis, it operates like Big Data processing machines. There are prospects in the sector. IDC predicts the market for the Big Data sector will grow 27% per year to $32.4 billion by 2017. The service could make Microsoft's platform more unique.        

The Xbox is enjoying a steady growth
Microsoft had been tight-lipped regarding the health of its Xbox One sales. Its third quarter results have proven that the product is now a considerable contributor to Microsoft's results. Microsoft sold in 2 million Xbox consoles, including 1.2 million Xbox One consoles. The company is partnering with Channel 4 to
create engaging interactive experiences for the product. Signs point to the product as a dependable source of Microsoft's income. Sales of the game console hardware are forecast to jump 14% to 32 million units worldwide, says Strategy Analytics.

Office 365 is showing improvements
Microsoft is evolving. Its new slogan is "mobile first, cloud first." In the cloud segment, the company is encouraging Microsoft Office users to migrate toward the web-based Office 365. In the third quarter, Office 365 Home had 4.4 million subscribers. The product's revenue more than doubled. Microsoft could make further gains going forward.
Cisco predicts the cloud IP traffic will grow at a compound annual growth rate of 35% from 2012 to 2017.

Though Microsoft's Xbox One is now a considerable contributor to the company's results, the product still has to contend with Sony's (NYSE:SNE) PlayStation 4. Sony's purchase of Gaikai in 2012 saw it take a shortcut toward establishing a cloud framework for the product, which was recently unveiled in the form of PlayStation Now. Sony expects an upside. According to Gartner, the video game console market will hit $55 billion in 2015. 

Critics say that Amazon.com's (NASDAQ:AMZN) Fire TV can't be a viable video gaming platform, but Amazon has been working with game developers to improve the product. To make it attractive, Amazon made it far cheaper at $99 than the Xbox One at $499. Amazon expects the gaming sector to be a profitable one in the near future. According to Cisco, the global online video users are expected to grow from 1.1 billion in 2012 to nearly 2 billion by 2017. 

Foolish takeaway
Microsoft has become an outperformer. It is no longer the dog that many flogged just a year ago. The growth of its Azure Intelligent Systems Services, the rise in Xbox sales, and the improving fortunes of Office 365 will enable it deliver market-beating returns in the next few years.

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Mark Girland has no position in any stocks mentioned. The Motley Fool recommends Amazon.com and Cisco Systems. The Motley Fool owns shares of Amazon.com 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.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't 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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