Microsoft Makes Nice With -- Here's Why

After achieving (another) record high yesterday, U.S. stocks are roughly flat in early trading Friday, with the benchmark S&P 500 and the narrower Dow Jones Industrial Average (DJINDICES: ^DJI  ) up 0.04% and down 0.11%, respectively, at 10:30 a.m. EDT. In company-specific news, Microsoft (NASDAQ: MSFT  ) and customer relationship management software specialist (NYSE: CRM  ) announced yesterday afternoon a "global, strategic" partnership. Salesforce shares are down 0.80% in early trading Friday, but the announcement may be more significant for Microsoft.

As a former software industry sales executive, I can confirm that "strategic partnerships" between enterprise software vendors are a dime a dozen. In fact, less than two weeks ago, Microsoft and Salesforce competitor SAP announced that they had expanded their "global partnership" to provide access to SAP tools on Azure, Microsoft's cloud platform, as well as increased interoperability with Microsoft applications.

However, Microsoft and Salesforce apparently consider this deal significant enough to merit a conference call in order for the CEOs of both companies to sell the benefits of the partnership. The agreement is certainly more than an exercise in co-marketing, as it actually required developing compatibility between Microsoft's Windows environment and applications and Salesforce. However, why trumpet this deal rather than the one with SAP, which is a much bigger company?

For two reasons, I think:

  • Under former CEO Steve Ballmer, Microsoft had a contentious relationship with Salesforce. In 2010, Salesforce CEO Marc Benioff called Microsoft the "evil empire," adding that "there's an old industry ... and they're trying to do everything they can to stop [Salesforce's advance in cloud computing and cloud customer relationship management]." In a jibe at Salesforce, Microsoft was then running ads with the tag line: "Don't Get Forced, Get What Fits."

By extending an olive branch to Salesforce, new Microsoft CEO Satya Nadella is signaling a break with Ballmer's aggressive "take no prisoners" approach to the industry. The move also suggests that Nadella recognizes that, in a world that is shifting toward mobile devices, Microsoft is no longer the default operating system and must, therefore, adopt a different attitude toward its comopetitors. This is consistent with Microsoft's March introduction of the Office suite on the iPad, something it had long resisted.

  • Furthermore, is one of the pioneers of cloud-based computing, whereby companies access a software application hosted on a third-party's servers via a Web interface. Nadella is leading an energetic drive toward cloud computing at Microsoft; at the inaugural Code Conference this week, he referred to Microsoft as a "cloud and mobile-first company." Teaming up with bolsters its credibility in and commitment to this area.

I have been enthusiastic in my praise of Nadella so far -- he is a welcome change from the Ballmer regime. This latest news is more evidence of the change in leadership style and confirmation that the new CEO understands that the world has changed and that Microsoft must change with it to remain relevant.

Beyond Microsoft: Are you ready for this $14.4 trillion revolution?
Have you ever dreamed of traveling back in time and telling your younger self to invest in Apple? Or to load up on at its IPO, and then just keep holding? We haven't mastered time travel, but there is a way to get out ahead of the next big thing. The secret is to find a small-cap "pure-play" and then watch as the industry -- and your company -- enjoy those same explosive returns. Our team of equity analysts has identified one stock that's ready for stunning profits with the growth of a $14.4 TRILLION industry. You can't travel back in time, but you can set up your future. Click here for the whole story in our eye-opening report.

Read/Post Comments (1) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2977114, ~/Articles/ArticleHandler.aspx, 9/3/2015 9:39:56 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Alex Dumortier

Alex Dumortier covers daily market activity from a contrarian, value-oriented perspective. He has been writing for the Motley Fool since 2006.

Today's Market

updated 23 minutes ago Sponsored by:
DOW 16,374.76 23.38 0.14%
S&P 500 1,951.13 2.27 0.12%
NASD 4,733.50 -16.48 -0.35%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/3/2015 4:35 PM
^DJI $16374.76 Up +23.38 +0.14%
CRM $68.25 Up +0.27 +0.40% CAPS Rating: **
MSFT $43.50 Up +0.14 +0.32%
Microsoft CAPS Rating: ***