Today, Microsoft Corporation (NASDAQ:MSFT) is scrambling to catch up to Apple and Google in the tablet and smartphone markets, with little success. In short, Microsoft was so focused on its core that it failed to aggressively innovate. Now a renewed focus on innovation is the only thing that can save Bill Gates’ company.
Microsoft is taking steps in the right direction with its Surface PC strategy, but consumers have yet to get on board. Microsoft’s most recent quarter saw net income drop by 22% on a quarterly basis, which included a charge related to excess surface inventory. That isn’t a good sign. I think Microsoft Corporation (NASDAQ:MSFT) is a sell for now.
Focus on profitability
Profitability seems obvious. After all, every business should focus on profitability. True, but sometimes companies get caught up in growth or new opportunities at the expense of profit margins. Investments don’t always pan out, and a focus on profitability is an excellent method of rebuilding.
Recently, French telecommunications equipment firm Alcatel Lucent SA (ADR) (NYSE:ALU) announced a plan to cut about $1.34 billion of annual costs and sell around $1.34 billion in assets. CEO Michel Combes said that Alcatel Lucent SA (ADR) (NYSE:ALU) will lean more on its Internet Protocol routing business – one of Alcatel’s more successful segments.
The new plan has one focus: profitability. Alcatel Lucent SA (ADR) (NYSE:ALU) worked hard to recover following the financial crisis, only to see its stock lose 48% of its value in 2011. The firm crashed in part because it couldn’t effectively manage its many product lines. Now, Combes is slimming down the company and directing focus back to the bottom line. So far, the market is showing confidence in the plan, as Alcatel Lucent SA (ADR) (NYSE:ALU)’s stock increased 106% since Combes took over on April first.
Alcatel Lucent SA (ADR) (NYSE:ALU) is looking up, and I believe in what Combes is doing. I would go long.
Final Thoughts
A focused business is a successful business. While I think the three points of focus I mentioned can be applied to most businesses, not every company fits into one of these categories. Still, every company must be focused on something, or it will fail. No exceptions.
Find a focused company, and chances are that you will find a good investment.
The article The Key to Every Successful Business originally appeared on Fool.com and is written by Marie Palumbo.
This article was written by Randy Holcombe and edited by Chris Marasco and Marie Palumbo. Chris Marasco is HeadEditor of ADifferentAngle. None has a position in any stocks mentioned.The Motley Fool owns shares of Microsoft.
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