Microsoft Corporation and IBM Go Toe to Toe, Again

With the introduction of its cognitive computer system imminent, the software giant will soon compete with an old foe.

Jun 18, 2014 at 12:02PM

It's no secret that we are living in an age of data -- a seemingly endless stream of it. With so many people connected from dawn until dusk, using everything from a television to a smartphone, the sheer volume of information companies are able to gather is staggering. However, collecting all of that data is only step one, and the easier step. The hardest part is determining how best to sort through, and ultimately utilize information to better communicate with customers.

How do companies successfully use all that information? If you ask IBM (NYSE:IBM), the answer's simple: Implement a cloud computing strategy incorporating its cognitive, super-computing marvel, Watson. You may recall, Watson famously won the game show Jeopardy, showing off its ability to actually learn based on previously input data, trend analytics, and communicative capabilities. Not to be outdone, IBM's sometime nemesis and longtime peer Microsoft (NASDAQ:MSFT) is getting close to introducing its own cloud-based supercomputer. Let the battle for big data begin.

So, we meet again
Microsoft and IBM have more in common than simply playing in the same software and services sandbox for all these years. Both, admittedly, were slow to make the transition to cutting-edge technologies like mobile, cloud, and big data. But that's changed, as Microsoft's new CEO Satya Nadella and IBM chief Ginni Rometty have made it clear the transformation of their respective companies is priority No. 1.

It's the commitment to changing what were once staid, tired businesses to meet the demands of today's data-driven world that has given investors of both Microsoft and IBM cause for hope. One look at the last quarter says it all.

Microsoft reinforced its new direction when it introduced its most recent earnings release by saying, "Cloud Momentum Helps Drive Third-Quarter Results." It's pretty clear what Nadella and team would like shareholders to focus on, and for good reason. IBM is no different. Even though revenue, earnings, and most other top-line measures were down in its recently completed 2014 Q1 results, Rometty wastes no time in sharing that cloud-related revenues were up more 50% year over year, and cloud-delivered-as-a-service sales were tracking at $2.3 billion annually.

Watson, meet Azure
IBM left little doubt it was serious about making a dent in the fast-growing world of big data earlier this year when it announced it was investing $1 billion to fund a new division devoted solely to bringing the power of Watson to the business world. Already, Watson is finding its way into the market. The latest victory for IBM's big data initiative is call center giant Genesys agreeing to sign on.

The Azure cloud platform isn't new; it's been at the core of many Microsoft cloud services for some time. But according to a recent blog, Microsoft is nearly ready to introduce a new, super-charged big data solution called Microsoft Azure Machine Learning. Like Watson, the new cloud-based Azure has the ability to analyze millions of data bits in seconds and conduct predictive analysis that improves as it "learns."

A defining aspect of Microsoft's new Azure -- which is scheduled to be unveiled next month -- is the ability to have the all-encompassing big data service up-and-running "in mere hours," as opposed to weeks or months generally needed to implement such a comprehensive solution. Like IBM, Microsoft also has the advantage of being able to combine its cloud-based, big data solution with a full suite of ancillary tools and services like Office 365, Bing, and even Xbox.

Final Foolish thoughts
Unlike some recent, strategic steps Microsoft has taken of late -- introducing Office for iPad and the new pseudo-tablet Surface Pro 3, to name just a couple -- the new Azure cognitive computing marvel is pure Nadella, all the way. Before being named CEO of Microsoft, Nadella was responsible for, among other things, heading up the cloud and enterprise division, of which the new Azure is key component.

In other words, Microsoft investors can rest assured an emphasis on the fast-growing big data marketplace using Azure will continue. And that's just as it should be. Microsoft is close to joining IBM with a cutting-edge big data solution, once again coming head-to-head with its old rival. The good news for both is this isn't a do-or-die battle. The market for big data's new enough, and Microsoft and IBM are both early entrants. But it will still be intriguing to watch the battle unfold -- just like old times.

Leaked: Apple's next smart device (warning, it may shock you)
Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early-in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!

Tim Brugger has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple, International Business Machines, 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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