Could it Work?
Microsoft has something that Amazon doesn’t, a full suite of business products that all work together, from desktop software to the “cloud.” And the business community is very comfortable with the company’s products and reputation. So, trimming the price could be a good call to drum up new business and win accounts that otherwise would have gone to a cheaper option.
A Mobile Laggard
The real concern here is that Microsoft’s price shift exposes one more area in which it is a mobile laggard. However, Microsoft isn’t standing still. For example, it launched a new mobile operating system in conjunction with Nokia Corporation (ADR) (NYSE:NOK). That company’s Lumia phone was a showcase for the power of its new mobile operating system and for Nokia’s ability to build a desirable cell phone. While the phone may or may not turn out to be a long-term success, it clearly proved that both companies still have something to offer.
In fact, for aggressive investors, Nokia Corporation (ADR) (NYSE:NOK) is a good way to get exposure to emerging markets. While it is an also ran in mature markets, it still has a notable position in lesser developed ones. So, even without breaking into the big leagues, it could still have a solid future as emerging markets industrialize. This is also why Microsoft’s efforts with the company could prove an astute long-term decision.
If both companies can establish themselves in growing markets that can’t yet afford high-priced products from competitors like Apple, they would be tapping into the world’s big growth story. They would also build a barrier against new competition when the emerging markets can afford more expensive offerings. That’s a clear win for Nokia and Microsoft.
Back to the Web
Getting a foothold in a growing market is also why the “cloud” services price drop makes long-term strategic sense. In this case, Microsoft is trying to cement its position before it winds up an also ran, again. It has the cash and the cash-cow businesses to support the effort, too.
While Amazon is a great company, its shares are trading at pretty steep levels. Microsoft’s are not. Only growth minded investors should be looking at Amazon. Since there’s plenty of room for both companies in the “cloud,” Microsoft looks like a better value and income play at the moment.
That said, Microsoft has a lot of moving parts. Still, it is a financially strong company that is very well run. It’s worth taking the risk that its transition to a more desirable product lineup is a little bumpy.
The article This Tech Giant Is Playing Catch Up originally appeared on Fool.com and is written by Reuben Brewer.
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