Tech stocks can be volatile. Very often we see some of them shooting through the roof while others are crashing to the floor. But don’t worry, there are still solid companies in tech. For instance, Microsoft Corporation (NASDAQ:MSFT) stock might be able to offer you both stability and growth.
The No. 1 Catalyst for Microsoft Stock
The keyword here is ecosystem, which has become increasingly popular in tech. No matter if it’s Amazon.com, Inc. (NASDAQ:AMZN), Alibaba Group Holding Ltd (NYSE:BABA), or Apple Inc. (NASDAQ:AAPL), tech giants like to see themselves as more than just their core businesses.
For investors, companies’ ecosystems can bring new perspectives. When a company launches a new product or service, we might not just look at its standalone value. Instead, we can see how the product or service would fit into the company’s entire ecosystem.
But for this to work, the company needs something that grabs consumers first. It has to be an essential product or service that consumers cannot live without. So when the company launches new stuff, it can easily market it to existing users of its core products or services.
Luckily, Microsoft has the core ingredient for its ecosystem—“Windows.”
The success of Microsoft’s Windows operating system is perhaps the best example of the first mover advantage. When personal computers became a possibility, Bill Gates knew that manufacturers really needed computer programs to sell to users. So Microsoft created the “MS-DOS” operating system for International Business Machines Corp. (NYSE:IBM) in 1980. On November 20, 1985, Microsoft unveiled the first retail version of Microsoft Windows—“Windows 1.0.” The rest is history.
You may think that the cool kids today are using “MacBooks” and that Windows is obsolete. However, in less than six months since its launch, “Windows 10” has been installed on more than 200 million monthly active devices. (Source: “Windows 10 Now Active on Over 200 Million Devices,” Windows Blog, January 4, 2016.)
The success of Windows also brings out numerous products and services from Microsoft. Recently, the most notable one has been its “Surface” tablets. Since the company introduced “Windows 8,” which supports touchscreens, the idea of having a Windows tablet has translated well into reality.
Despite launching two years after the original “iPad,” the Microsoft Surface has steadily built up its presence. In October 2015, shares of Microsoft’s online tablet sales surged to 45%, surpassing Apple to become the largest online tablet vendor in the U.S. (Source: “Microsoft Beats Apple in Online Tablet Sales,” WinBeta, December 4, 2015.)
Another example is the company’s “Office” suite of productive software. Again, you may say that Microsoft Office is the outdated choice. Still, its newest version—“Office 365”—is currently in use at four out of five Fortune 500 companies. (Source: “Microsoft Earnings Conference Call,” Microsoft Corporation, last accessed December 10, 2015.)
The Bottom Line on MSFT Stock
Let’s not forget that Microsoft also offers “Outlook,” “Windows Server,” “Windows Azure” (its cloud computing arm), “Skype,” “Xbox,” and numerous other products and services. Unless you are a diehard Apple user, you most likely use some of Microsoft’s services every single day.
The stock market could go up or down. But as long as Microsoft’s ecosystem keeps running, MSFT stock will continue to be a staple for many investors.