Nadella Has Big Plans for MSFT Stock
A friend of mine once said I wear rose-colored glasses when looking at Microsoft Corporation (NASDAQ:MSFT), but I don’t think that’s true. After all, I never even glanced at MSFT stock when Steve Ballmer was its CEO.
Moreover, I hate the “Bing” search engine. Google is miles ahead in that category and it costs me nothing to say so. But I’m still hugely bullish on Microsoft. From an investment standpoint, there’s no denying its share price is on the cusp of enormous gains.
The big turnaround only started in February 2014, when Satya Nadella took the reins of this storied company. He has been with the company since 1992 and there isn’t a corner of it he doesn’t know. Nadella has Microsoft mapped on the back of his hand.
During Ballmer’s tenure he had led the cloud and enterprise division, a bright spot in an otherwise dark and dismal company. Nadella’s division “outperformed the market and took share from the competition,” making him Ballmer’s natural successor.
Nadella has a vision for Microsoft, which is something we haven’t seen since the Bill Gates era. He doesn’t want to mimic what Alphabet Inc and Apple Inc. are already doing; he wants to bring Microsoft back to its roots—the “office space.”
Rather than going after driverless cars or wearable technology, Microsoft is trying to re-establish itself as a service provider to any and all businesses.
Don’t believe me? Listen to this: When Satya Nadella talks about Microsoft’s greatest product, do you know which one is at the top of his list? “Excel.” Not “Xbox,” “Windows,” or the “Surface” notebook—Excel. Nadella thinks the nerdiest, most un-sexy of all Microsoft’s products is its greatest. (Source: “Satya Nadella cannot imagine the world without this one Microsoft product,” Business Insider, June 30, 2016.)
That’s who we’re talking about here. He doesn’t care about flash or what’s the hottest trend. He cares about impact. What makes the biggest difference to businesses and how can we make money selling it to them.
“Think about a world without Excel,” he said. “People couldn’t make sense of numbers before, and now everybody can.” (Source: Ibid.)
Nadella is using that same line of reasoning to shape Microsoft’s future and it’s a beautiful thing to watch.
The company has revamped its customer relationship management (CRM) offerings to make it more user-friendly. Customers can choose the apps they need, from finance to sales to operations. They can turn the data into stunning visuals or use a new predictive analysis feature to plan ahead. (Source: “Microsoft Ups Salesforce, Oracle Rivalry With New Cloud Product,” Bloomberg, July 6, 2016.)
Both of these features are powered by Microsoft’s artificial intelligence software, also known as “Cortana.” The aim is to make complex number-crunching easy enough for any skill level. Basically, Nadella wants Microsoft to keep churning out products like Excel.
They may not be flashy, but they’re necessary and that’s a whole lot better.
The same stands true for cloud computing. Businesses don’t want to pay for their own servers and technicians anymore; they simply want to outsource that kind of IT work. Lucky for them, plenty of companies are leasing out space from their own data centers.
“Amazon Web Services” is the 800-pound gorilla in this market. It is a formidable competitor, but Microsoft can offer package deals to businesses that no one else can. It has “Office” and “Outlook”—two pillars of the office space.
Even the acquisition of LinkedIn Corp makes sense if you understand that Microsoft wants to own everything to do with the office space.
It was an expensive takeover, I’ll admit that, and many people thought it was a horrendous decision. However, just think of it this way: Microsoft just bought user data on 400 million working professionals. It also bought a way to get customers onto its “Azure” platform. Both of those purchases could end up fattening MSFT stock’s bottom line.
“We see business applications as a big opportunity in and of itself, but also as an opportunity to drive customers to Azure,” said Takeshi Numoto, the firm’s VP of marketing for its cloud and enterprise division.
I’m really bullish on this office space strategy. Everyone else is trying to sell to customers directly, but Microsoft is aiming for the business-to-business (B2B) market. From my experience, that means the company is in line for some enormous growth over the next 24 months.