Microsoft Corporation (MSFT): Bursting Onto This Scene

Page 1 of 2

Microsoft Corporation (NASDAQ:MSFT) has been facing quite a few headwinds lately. Research firm IDC reported the largest year-over-year decline in PC sales last month. Forecasters expect the decline to continue with the proliferation of mobile devices.

Microsoft Corporation (NASDAQ:MSFT)

Microsoft showed up late to the mobile game, and still trails Apple Inc. (NASDAQ:AAPL) and Google Inc (NASDAQ:GOOG) by a huge margin. Meanwhile Windows 8 has largely failed to become the catalyst for the PC market many expected it to be as Windows sales remained flat last quarter.

However, Microsoft Corporation (NASDAQ:MSFT)’s cloud-computing solution, Windows Azure, surpassed $1 billion in revenue in the last year and is growing fast. Could cloud computing be the saving grace for Microsoft?

Bursting onto the scene

Microsoft Corporation (NASDAQ:MSFT) started offering its Platform as a Service in 2010, again late to the game. Amazon.com, Inc. (NASDAQ:AMZN) had been offering its servers to developers since 2006. Google Inc (NASDAQ:GOOG) wasn’t too far behind, releasing its App Engine in 2008.

But unlike its slow growth in mobile, Microsoft Corporation (NASDAQ:MSFT) has been able to grow Azure to a 20% market share – more than Google’s, but significantly trailing Amazon’s 71%. Azure subscriptions have grown 48% in the last six months.

Last month, Microsoft unveiled the addition of Infrastructure as a Service to the Azure suite, and vowed to match Amazon.com, Inc. (NASDAQ:AMZN)’s pricing. Since then, the company added 10,000 new subscribers.

Microsoft Corporation (NASDAQ:MSFT)’s fantastic growth in cloud computing led Forrester Research analyst James Staten to estimate Microsoft could command 35% of the market by next year while doubling its current revenue. That would make Microsoft a realistic threat to Amazon’s dominance, and relegate Google to the sidelines.

Growing market

But it’s unlikely Microsoft will be able to take much business away from Amazon or Google Inc (NASDAQ:GOOG). Switching costs are just as significant, if not more, in the enterprise world as in the consumer world. Even after giving away free software to cloud users, Microsoft couldn’t convince many companies to switch despite its new price and capability parity with Amazon.com, Inc. (NASDAQ:AMZN).

It’s really battling for the next $25 billion in market share. Gartner expects the Infrastructure as a Service to be the fastest growing part of the cloud market over the next five years climbing from $6.17 billion last year to over $30 billion by 2017.

That’s why Microsoft Corporation (NASDAQ:MSFT) announced its entry into the segment last month — again, late to the game. Google announced its IaaS product nearly a year ago. Rackspace Hosting, Inc. (NYSE:RAX), and its consortium of OpenStack partners, have been carving out a nice sized chunk of the market for some time now. And of course, Amazon still dominates the market.

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

Richest Doctors in the World

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

The Most Successful Reality TV Stars

Cheapest Cities to Visit in the US

Most Expensive Summer Camps

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

Top 10 Highest Paying Jobs in the World

Most Expensive Day-Care in New York City

The 10 Cheapest Places to Retire Abroad

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!