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Can a Leaner and Meaner Microsoft Corporation (MSFT) Learn From Its Past Mistakes?

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To most investors, Microsoft Corporation (NASDAQ:MSFT) is the textbook example of a slow-growth tech stock, a cooling red giant that was once the brightest star in the tech universe. Although the stock climbed an admirable 23% over the past twelve months, Wall Street’s general perception of Microsoft Corporation (NASDAQ:MSFT) is that its best days are behind it, despite CEO Steve Ballmer’s eager attempts to prove that the company still has a few tricks up its sleeve.

Microsoft Corporation (MSFT)However, as a value-focused investor, I wouldn’t be so quick to dismiss Microsoft Corporation (NASDAQ:MSFT). Even though its missteps with Windows 8 and Office 365 have damaged the company’s credibility, I believe that the company could still get back on the right track.

Therefore, let’s analyze Microsoft Corporation (NASDAQ:MSFT)’s recent moves, and see if the company can still prove to Wall Street that it still has the clout to take on market leaders Google Inc (NASDAQ:GOOG) and Apple Inc. (NASDAQ:AAPL).

Creating a unified operating system

To modernize and streamline Microsoft Corporation (NASDAQ:MSFT)’s operations, Steve Ballmer recently announced Microsoft’s biggest reorganization in five years. The most important change was the elimination of its five business units – Windows, Server and Tools, Microsoft Business Division, Online Services, and Entertainment & Devices, which previously operated separately under their own presidents and CFOs.

All three of the company’s operating systems – Windows 8, Windows 8 RT and Windows Phone 8 – will be unified under a single division, the Operating Systems Group, to share more technologies and make cross-platform applications much easier to develop. It’s a move that could make app development more appealing than it is today, and more similar to Android’s cross-platform availability of apps on smartphones, tablets and hybrids.

In other words, developers would not have to rewrite a program for three separate Microsoft architectures. They would only have to write a single one that could work across all three platforms, so a program written for Windows Phone 8 could also be used on a Windows 8 laptop. This single Windows shared architecture could finally evolve from a scattered, hardware-defined operating system into a unified “write once, run anywhere” system to rival Android. Ballmer notably assigned Terry Myerson, the head of Windows Phone engineering, to head the Operating Systems Group, which suggests that Windows operating systems will now be built with the smartphone as the top priority.

If this initiative is successful, it would also improve Microsoft’s current 6% share of the mobile market, which has been primarily attributed to the growth of Nokia Corporation (ADR) (NYSE:NOK)s Windows Phone devices.

Streamlining its segments

Meanwhile, Bing, MSN, Office, Dynamics CRM and ERP, Skype and other applications are now grouped under the newly created Applications and Services division. Server technologies are now clumped together under its Cloud and Enterprise Group, while the Xbox, Surface, PC peripherals, games and entertainment are now part of the new Devices and Studios Group.

These four newly formed divisions, now called “engineering centers,” will all report directly to Ballmer, who will still stay on as CEO, much to the chagrin of some shareholders. However, this realignment of its core teams should, in theory, lead to faster product releases.

The need for speed

Under Ballmer’s leadership, Microsoft became a reactive company rather than a proactive one. The company has a history of reacting far too slowly to hot tech trends, such as portable music players, smartphones and tablets. When Microsoft’s products finally arrive, they are often underwhelming and unpopular, like the Zune, the Kin and the Surface.

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